HG 


UC-NRLF 


^B    37    3M5 


THE 
COOPERATIVE  PEOPLE'S  BANK 

LA  CAISSE  POPULAIRE 

by 
ALPHONSE    DESJARDINS 


I'his'pamphle.    is  oi  linarily   sol:i    at    ....    ..... 

indicated  on  the  cover.  We  have  on  hand  a 
number  of  damaged  copies  which  are  distributed 
with  Mir  charjre. 


Published  by 

Division  of  Remedial  Loans 

Russell  Sage  Foundation 

130  East  22nd  Street 

New  York  City 


August,   1914 


Price  15  Cents 


GIFT  OF 


Digitized  by  tine  Internet  Archive 

in  2007  with  funding  from 

IVIicrosoft  Corporation 


http://www.archive.org/details/cooperativepeoplOOdesjrich 


^^/y^-^^^^i-'^^L^^        A/-^  ^i'^^^^'^^^'T^^-^ 


THE 
COOPERATIVE  PEOPLE'S  BANK 

LA  CAISSE  POPULAIRE 


by 


ALPHONSE    DESJARDINS 

Commandeur  de  L'Ordre  de  Saint  Gregoire  le  Grand 

Fondateur  des  Caisses  Populaires 

President  et  Gerant  de  La  Caisse  Populaire  de  Levis 

Directeur  General  de  L' Action  Populaire  Economique 


Published  by 

Division  of  Remedial  Loans 

Russell  Sage  Foundation 

130  East  22nd  Street 

New  York  City 


^^vi 


Copyright,  1914,  by 
The  Russell  Sage  Foundation 


PREFACE 

The  growing  interest  in  cooperative  credit  as  a  possible 
solution  of  the  problem  of  financing  the  farmer  and  eliminating 
the  evils  of  the  small  loan  business  in  cities,  intensified  by  the 
investigations  of  the  American  and  United  States  Commissions 
abroad  and  the  publication  of  the  reports  of  their  findings, 
prompts  the  Russell  Sage  Foundation,  through  its  Division  of 
Remedial  Loans,  to  publish  this  brief  statement  of  the  operations 
of  the  Cooperative  People's  Banks  of  Canada,  written  by  a 
Canadian  who  has  been  correctly  termed  "The  founder  of  co- 
operative banking  on  the  American  continent." 

To  the  eflforts  of  M.  Desjardins  and  Mr.  Pierre  Jay  is  due 
no  small  part  of  the  interest  now  being  manifested  in  the  sub- 
ject in  the  United  States,  for  it  was  at  the  invitation  of  the 
latter  while  Bank  Commissioner  of  Massachusetts  that  M. 
Desjardins  visited  that  state  in  1908  to  explain  to  the  legislative 
committee  on  banking  the  theory  and  practice  of  his  Canadian 
system  and  to  arouse  public  interest  in  this  important  agency  for 
thrift  and  effective  weapon  against  usury.  As  a  result  of  the 
efforts  of  these  two  men  Massachusetts  enacted  in  1909  a  credit 
union  law  which  has  been  used  as  a  basis  for  legislation  in  New 
York,  Texas,  and  Wisconsin.  Under  the  Massachusetts  law 
thirty-four  credit  unions  have  been  organized  and  are  now  in 
successful  operation  in  that  state. 

To  avoid  possible  confusion  it  may  be  well  to  state  that  the 
Cooperative  People's  Banks  of  Canada,  the  People's  Banks  of 
Italy,  the  Cooperative  Credit  Associations  of  Germany  and  other 
European  countries  and  the  Credit  Unions  of  the  United  States, 
while  differing  in  many  details  (chiefly  in  respect  to  the  liability 
of  members),  are  essentially  identical  in  that  they  are  cooperative 
agencies  which  stimulate  thrift  and  put  at  the  disposal  of  the 
thrifty,  for  beneficial  purposes,  funds  which  they  have  accumu- 
lated and  funds  which  through  their  combined  credit  they  have 
obtained  from  other  sources. 


3G1354 


M.  Alphonse  Desjardins  was  born  at  Levis,  Quebec,  in  No- 
vember, 1854.  After  graduation  from  Levis  College  in  1870  he 
entered  journalism.  He  continued  in  this  profession  for  a  num- 
ber of  years  gradually  becoming  interested  in  the  problem  of 
usury  because  of  frequent  references  to  it  in  the  press  and  on 
the  floor  of  the  Canadian  ParUament.  For  twenty  years  he 
studied  the  cooperative  credit  associations  of  Europe,  familiar- 
izing himself  with  the  history  of  their  growth  and  corresponding 
frequently  with  Mr.  Henry  W.  Wolff,  M.  Eugene  Rostand,  M. 
Charles  Rayneri  and  other  leaders  in  this  movement  abroad. 
He  studied  the  habits  of  the  Canadian  people,  their  surround- 
ings, and  their  necessities,  and  evolved  a  new  type  of  people's 
bank.  Finally,  in  1900,  he  called  a  few  friends  together  at  his 
home  in  Levis  to  discuss  the  advisability  of  organizing  a  credit 
union  in  that  city.  Three  months  after  this  meeting  La  Caisse 
Populaire  de  Levis  was  organized  with  a  membership  of  ninety 
and  a  paid-in  capital  of  twenty-eight  dollars.  Since  that  time 
M.  Desjardins  has  been  the  manager  and  president  of  the  Levis 
credit  union,  giving  his  services  without  remuneration. 

M.  Desjardins  was  the  principal  expert  witness  called  in 
1907  by  the  Canadian  Parliamentary  commission  which  made  an 
exhaustive  enquiry  into  the  subject  of  cooperative  credit. 

Though  he  is  an  official  of  the  Canadian  House  of  Commons 
and  a  busy  man,  M.  Desjardins  has  found  time  not  only  to  watch 
over  the  Levis  Bank  but  also  to  deliver  his  message  to  com- 
munities in  all  parts  of  the  Provinces  of  Quebec  and  Ontario, 
with  the  result  that  one  hundred  and  fifty  cooperative  credit  as- 
sociations are  now  in  successful  operation.  He  has  not  yet  suc- 
ceeded in  convincing  Parliament  of  the  necessity  of  enacting  a 
Dominion  law  for  cooperative  enterprises,  but  last  year  the  Pope 
conferred  knighthood  upon  him,  thus  recognizing  the  immense 
value  of  his  work,  his  self-sacrifice  and  energy  in  laboring  for 
the  common  good. 

Arthur  H.  Ham, 
Director,  Division  of  Remedial  Loans, 

Russell  Sage  Foundation. 


THE   COOPERATIVE   PEOPLE'S  BANK 
LA  CAISSE  POPULAIRE 

The  keen  observer  of  the  phenomena  of  economics  can- 
not fail  to  realize  the  important  part  credit  plays  in  promoting 
and  sustaining  productive  activities.  Without  its  actual  or 
potential  support  many  of  the  greatest  and  most  beneficent 
enterprises  would  never  have  been  conceived,  or,  once  con- 
ceived, would  have  become  completely  paralyzed. 

While  in  a  more  humble  sphere  than  that  of  the 
financier — namely  among  the  working  classes — credit  has 
not  so  great  an  importance,  yet  the  power  to  contract  loans 
for  legitimate  and  useful  purposes  is  nevertheless  necessary 
and  such  loans  often  prove  extremely  advantageous.  The 
history  of  the  early  middle  ages  demonstrates  this  fact  as 
clearly  as  do  recent  events.  The  founding  in  Italy  in  the 
middle  of  the  15th  century  of  the  associations  called  "Monts 
de  Piete"  which  afterwards  spread  throughout  central  Europe, 
shows  how  great  and  how  universal  was  this  need. 

Forcibly  struck  by  the  meagre  borrowing  resources  of 
the  poor  and  by  the  evils  resulting  from  the  practices  of 
usurers — the  only  agents  who  gave  credit  to  the  working 
classes — a  number  of  religious  bodies,  helped  by  benevolent 
citizens,  set  themselves  to  work  out  the  problem.  They  suc- 
ceeded in  organizing  charity  upon  a  new  ground.  Bernadin 
de  Feltre,  a  monk,  distinguished  himself  above  all  in  this 
field  by  his  intense  zeal  for  the  well-being  of  the  working 
classes  as  well  as  for  the  salvation  of  their  souls.  He  founded 
many  Monts  de  Piete  and  restored  many  others  which  were 
declining,  giving  them  all  a  vigorous  impetus,  and  his  con- 
quering and  persuasive  eloquence  caused  Christian  charity  to 
overflow  to  the  great  benefit  of  these  popular  institutions. 
One  can  assert,  with  Father  Ludovic  de  Besse,  that  the  Monts 
de  Piete  were  but  the  forerunners  of  the  improved  savings 
agencies  which  today  cover  not  only  Europe,  but  all  the 
civilized  world,  their  universality  being  but  a  natural  conse- 
quence of  their  highly  beneficial  character  in  satisfying  needs 
which  always  exist  and  are  often  urgent. 


But  the  Monts  de  Piete  thus  temporarily  restored  through 
the  influence  of  Bernadin  de  Feltre  soon  declined  again  on 
account  of  the  inherent  weakness  of  the  basis  upon  which 
they  rested.  With  the  charity  of  the  faithful  and  the  liberal- 
ity of  wealthy  individuals  as  their  only  resources,  these  or- 
ganizations could  not  reckon  upon  adequate  funds  with  which 
to  meet  the  demands  made  upon  them.  Thus  the  manage- 
ment was  obliged  later  on  to  offer  remuneration  (in  other 
words  to  pay  interest)  to  those  making  deposits  either 
temporarily  or  permanently.  This  measure  was  the  first  step 
towards  the  system  of  the  savings  bank  as  it  exists  today, 
but  as  we  v»  ill  see  later  they  were  performing  only  half  their 
function,  for  while  the  Monts  de  Piete  offered  loans  to  the 
poor  on  personal  property  they  made  no  provision  to  take 
the  place  of  the  traditional  wool  stocking. 

The  adoption  of  remuneration  or  payment  of  interest  re- 
ferred to  above  gave  a  new  impetus  to  the  Monts  de  Piete 
but  did  not  assure  them  the  stability  hoped  for  because  the 
essential  features  of  the  small  savings  system  were  not  under- 
stood, and  the  kind  of  investment  offered  could  be  profitable 
only  when  funds  of  some  magnitude  were  deposited.  But 
these  funds  were  soon  attracted  by  activities  promoted  by  the 
great  movement  of  international  trade  which  had  resulted 
from  the  improvement  of  maritime  transportation,  and  they 
gradually  took  other  directions,  leaving  the  Monts  de  Piete 
without  resources  except  those  provided  by  charity,  now 
greatly  lessened  by  indifference.  No  wonder  that  these  in- 
stitutions disappeared  one  by  one,  many  of  them  being  trans- 
formed into  purely  industrial  loaning  offices,  thus  losing  the 
high  character  given  them  by  the  Christian  spirit  that  had 
inspired  their  creation. 

In  studying  these  economic  organisms  of  past  centuries, 
one  can  see  their  defects  while  recognizing  to  the  fullest  ex- 
tent the  gratitude  that  their  authors  and  restorers  so  well 
deserve.  In  taking  up  the  problem  of  a  credit  system  for 
the  poor,  social  duty  as  well  as  personal  conscience  urges  us 
to  turn  to  account  the  knowledge  that  new  methods  and  varied 
financial  experiences  put  at  our  disposal.  But  let  us  not 
deceive  ourselves;  while  correct  business  methods  are  essen- 
tial,  zeal   for   the   public   welfare — another   manifestation    of 


charity  and  brotherly  love — should  today  as  formerly  play  a 
considerable  role  in  these  enterprises.  The  working  classes 
have  the  same  economic  needs  today  as  in  the  past,  are  the 
victims  of  the  same  selfishness  and  rapacity,  but  intensified 
by  modern  economic  methods.  It  follows  therefore  that  the 
necessity  of  protecting  them  is  even  greater  than  formerly, 
and  that  that  protection  should  be  afforded  by  institutions 
based  on  rules  assuring  their  usefulness  and  their  stability. 

The  evils  of  usury  from  which  for  generations  the  masses 
suffered  have  been  far-reaching  and  almost  universal.  It  is 
no  wonder  therefore  that  sociologists,  philanthropists,  econo- 
mists, and  ecclesiastical  and  civil  authorities  have  thought  it 
their  bounden  duty  to  try  to  lessen  this  burden.  Even  gov- 
ernments have  taken  a  leading  part  in  the  struggle  through 
enacting  proper  legislation  or  through  giving  support  to  those 
who  were  foremost  in  the  movement.  Without  doubt  the 
magnificent  expansion  of  small  savings  institutions  over  the 
civilized  world  is  largely  due  to  the  united  action  of  all  those 
social  forces  which  have  been  bent  upon  removing  the  ob- 
stacles that  have  prevented  the  people  from  enjoying  the 
whole  benefit  of  their  labor  and  thrift,  and  upon  establishing 
a  sure  reservoir  to  which  they  might  go  in  case  of  need,  as 
the  manufacturer  or  the  merchant  goes  to  his  bank  when  he 
wishes  to  supplement  his  own  funds  with  borrowed  capital. 


THE  NECESSARY  ASSOCIATION 

The  people's  welfare  can  best  be  secured  by  institutions 
organized  by  the  people  themselves,  because  these  institutions 
are  most  likely  to  possess  the  characteristics  that  appeal  to 
the  people  and  therefore  the  stability  necessary  to  perpetuate 
their  services. 

Their  beneficial  influence  will  be  still  greater  if,  to  a 
spirit  of  devotion,  disinterestedness  and  Christian  charity,  is 
added  the  direct  personal  interest  of  the  people  themselves, 
interest  purified,  strengthened  and  made  nobler  by  a  thorough 
knowledge  of  their  social  duty.  Resting  on  such  a  solid  basis, 
as  beneficial  from  the  moral  point  of  view  as  from  the  purely 
material,  such  an  organization  will  have  a  reassuring  strength 


and    cannot    but   command   the    attention   of    all    thoughtful 
minds. 

It  must,  of  course,  aim  at  a  permanent  result,  in  order 
that  one  success  may  secure  another,  thus  avoiding  that  un- 
certainty which  depletes  the  energies  by  the  necessity  of  per- 
petually renewing  efforts  without  the  hope  of  attaining  a 
definite  end.  To  secure  that  desirable  aim  the  organization 
should  be  worked  out  in  surroundings  and  under  circum- 
stances which  will  properly  support  and  fortify  its  activities, 
and  put  it  in  a  position  to  overcome  the  obstacles  that  are 
certain  to  present  themselves.  Developing  in  a  neighborhood 
which  has  its  own  traditions  and  a  distinct  existence,  this 
economic  organ  would  not  fail  to  increase  in  vitality  in  con- 
sequence of  constant  contact  with  the  life  of  the  community 
which  it  serves.  Growing  with  the  growth  of  the  neighbor- 
hood, the  credit  society  would  by  its  very  association  with 
it  as  well  as  by  its  benefits  to  it,  finally  complete  the  social 
life  and  raise  it  to  a  higher  plane.  Thus  would  the  society 
be  endeared  to  the  hearts  of  the  people. 


IMPORTANT  DEFECTS  OF  THE  MONTS  DE  PIETE 

SYSTEM 

The  principles  thus  explained,  let  us  now  examine  the 
defects  of  earlier  systems  and  consider  the  means  at  hand 
of  solving  the  problem  of  the  financial  needs  of  the  working 
man.  The  Monts  de  Piete,  as  we  have  shown,  were  the  first 
associations  furnishing  credit  to  the  working  classes.  The 
system  they  adopted  was  not  broad  enough;  for,  on  the  one 
hand,  charity  alone  was  relied  upon  to  bring  funds  to  the 
institutions  and,  on  the  other,  loans  could  be  granted  only 
upon  the  pledge  of  personal  property,  the  value  of  which  was 
supposed  to  be  sufficient  to  insure  reimbursement  if  the  bor- 
rower would  not  or  could  not  pay  the  sum  borrowed.  Al- 
though the  service  thus  rendered  was  inadequate,  the  system 
entailed  other  privations  such  as  the  absence  of  household 
furniture,  clothing,  etc.,  pledged  as  a  guarantee.  Moreover, 
the  sum  thus  loaned  was  much  less  than  the  real  value  of  the 
pledges.    One  can  therefore  realize  the  loss  that  the  borrower 


had  to  meet  if  he  was  unable  to  repay  the  loan.  The  net  re- 
sult to  him  was  a  greater  impoverishment.  In  spite  of  such  de- 
fects the  system  was,  however,  a  great  improvement  upon 
the  methods  of  usurers. 

Another  factor  of  economic  improvement  was  also  neg- 
lected in  this  early  credit  system — that  of  savings  systemat- 
ically stimulated  by  a  well  devised  organization.  It  is  un- 
deniable that  this  form  of  providence  minimizes  the  evils  of 
the  life — always  more  or  less  precarious — of  the  laboring 
class,  with  its  liability  to  accidents,  to  sickness,  and  to  un- 
employment, and  its  many  other  drawbacks,  which  do  not 
force  themselves  with  the  same  intensity  upon  other  classes 
of  the  community.  The  habit  of  saving  can,  as  has  since  been 
demonstrated,  lighten  this  heavy  burden. 

The  ideal  system  would  then  be  one  which  should  oflFer 
a  wide  credit  at  the  least  cost,  a  credit  available  to  all,  while 
at  the  same  time  it  appealed  to  all,  in  a  constant  and  practical 
way,  to  lay  aside  for  a  rainy  day;  a  system  in  short,  which 
should  put  at  the  disposal  of  the  working  classes  the  funds 
accumulated  by  themselves  through  providence.  Alas!  long 
years  were  to  elapse  before  the  leading  features  of  such  a 
system  were  worked  out. 


A  STEP  FORWARD 

In  the  early  days  when  public  attention  was  first  at- 
tracted to  the  financial  straits  of  the  working  classes,  it  was 
entirely  concentrated  upon  the  necessity  of  teaching  them 
the  habit  of  saving.  Eminent  philanthropists  earnestly  took 
up  the  question  and  organized  savings  clubs.  These  clubs 
were  of  a  very  rudimentary  character,  since  they  were  simply 
a  sort  of  association,  wholly  temporary,  having  as  a  basis  the 
zeal  of  a  devoted  citizen  who  volunteered  to  receive  the  sav- 
ings laid  aside  and  put  them  in  a  safe  place  or  kept  them 
at  the  disposal  of  the  depositors  for  urgent  needs.  Later, 
the  success  of  those  crude  attempts  induced  their  authors  to 
enlarge  their  field  of  action.  Thus  were  organized,  notably 
in  England  and  elsewhere,  the  first  independent  savings 
banks,  which  grew  rapidly  and  acquired  a  strength  that  none 


could  have  foreseen  at  the  start.  Unfortunately  abuses  of 
confidence  caused  losses,  the  more  to  be  deplored  because 
they  were  inflicted  upon  poor  people  unable  to  bear  them 
without  cruel  privations.  These  happenings  stirred  public 
opinion  to  a  very  high  degree  and  induced  people  to  look 
for  a  remedy  to  such  evils  in  a  system  of  rigid  state  control. 
As  in  most  reactions,  the  movement  was  violent  and  exag- 
gerated. The  need  of  the  working  classes  for  credit  was 
forgotten  and  care  was  bestowed  only  upon  the  protection  of 
their  savings.  Thus  the  working  man  in  search  of  a  loan  was 
left  to  the  mercy  of  the  loan  sharks.  Moreover  through  an 
exaggerated  paternalism,  governments  took  possession  of 
these  funds,  and  utilized  them  to  defray  expenditures  on 
public  or  large  capitalistic  enterprises.  They  thus  deprived 
the  people  of  the  means  whereby  their  resources  could  have 
been  developed,  their  spirit  of  enterprise  stimulated  and  their 
economic  horizon  enlarged. 


GOVERNMENTAL  SAVINGS  BANKS 

This  insurmountable  distrust  of  every  utilization  of  sav- 
ings except  investment  in  large,  carefully  selected  enterprises, 
or  in  loans  to  corporate  bodies  whose  character  resembled 
that  of  the  state  itself,  deflected  the  savings  of  the  people 
to  the  rich.  Common  sense  should,  it  would  seem,  have  in- 
duced the  authorities  to  adopt  an  entirely  different  course. 
But  instead  of  making  an  effort  to  dispel  the  timidity  of  the 
people  everything  done  had  the  effect  of  increasing  it.  In- 
stead of  endeavoring  to  find  out  the  best  means  of  organizing 
institutions  that  could  offer  proper  security  and  at  the  same 
time  serve  as  reservoirs  of  credit  for  the  working  classes,  the 
government,  without  the  least  hesitation,  undertook  the 
duties  of  universal  banker.  This  mistake,  full  of  peril  from 
an  economic  point  of  view,  soon  produced  unfortunate  results, 
the  evils  of  which  were  pointed  out  by  economists.  Already 
the  governments  that  adopted  this  course  have  begun  to 
suffer  from  the  magnitude  of  the  funds  which  they  attracted 
and  which  the  distrust  that  the  masses  felt  for  other  guardian- 
ship brought  into  their  coffers  in  ever  increasing  quantities. 


In  France,  this  evil  reached  such  an  extreme  that  the  gov- 
ernment v^as  compelled,  four  or  five  years  ago,  to  enact  a 
law  diminishing  the  maximum  of  individual  deposits  in  its 
savings  banks,  and  compelling  its  clients  to  w^ithdraw  sums 
aggregating  more  than  four  billions  of  francs.  It  was 
frightened  by  the  responsibility  that  was  being  placed  upon 
the  state.  And  what  is  most  remarkable  is  the  fact  that  when 
these  deposits  were  highest,  French  agricultural  interests 
were  deploring  the  lack  of  capital  to  secure  their  development 
and  improve  their  methods. 

However,  it  must  be  observed  that  this  want  of  financial 
equilibrium  in  the  utilization  of  savings  funds  is  now  calling 
forth  the  best  attention  of  the  very  governments  whose  short- 
sighted policy  so  largely  contributed  to  its  existence.  Eng- 
land, which  inaugurated  the  policy  of  governmental  banking 
through  the  organization  of  its  postal  savings  banks,  is  en- 
deavoring now  to  organize  a  regular  system  of  credit  for  the 
benefit  of  its  agricultural  classes,  and  with  this  object  in  view 
has  caused  exhaustive  inquiries  to  be  made  into  the  systems 
now  so  extensively  adopted  by  the  Continental  countries  of 
Europe.  The  results  of  those  inquiries  were  a  revelation  to 
the  English  public  and  proved  to  be  a  complete  confirmation 
of  what  Mr.  Henry  D.  Wolfif,*  the  eminent  economist,  has 
said  upon  the  subject  in  his  many  informing,  luminous  books 
and  pamphlets.  The  experiments  made  in  continental  Europe 
are  the  best  possible  evidence  that  the  savings  of  the  masses 
can  and  must  be  organized  by  and  for  their  direct  benefit, 
with  a  view  to  help  them  obtain  adequate  credit.  Not  only 
is  it  wise  economically  to  put  such  funds  at  their  disposal, 
but  the  system  offers  as  great  a  security,  if  not  a  greater  one, 
than  that  of  any  banking  system  known. 


*Some    of    Mr.    Wolff's    books    on    the    subject    are: 

Agricultural   Banks;   their   Object  and  their  Work.      109  p.    1894. 

Cooperation  in  Agriculture.  (Chapter  XII,  Cooperative  Credit,  p.  251-273.) 
378   p.    Lond.    King,    1912. 

Cooperative  Banking;  its  Principles  and  Practice,  with  a  Chapter  on  Co- 
operative Mortgage-Credit.     301   p.  Lond.  King,   1907. 

Cooperative    Credit    Bank    Handbook.     74    p.     Lond.,    King,    1907. 

People's  Banks;  A  Record  of  Social  and  Economic  Success.  Ed.  3,  rev. 
and   enl.    587   p.    Lond.    King,    1910. 


8 

THE  SCHULZE-DELITZSCH  AND  RAIFFEISEN 

BANKS 

Two  German  economists  were  the  first  to  obtain  a  clear 
conception  of  the  economic  needs  of  the  working  and  agri- 
cultural classes  and  of  the  best  means  of  satisfying  these 
needs.  The  names  of  Schulze  and  Raiffeisen*  are  inseparably 
attached  to  the  history  of  the  beneficent  institutions  they 
founded,  and  their  memory  is  held  in  great  respect  through 
all  the  German-speaking  countries  and  other  nations  where 
institutions  like  theirs  exist.  These  banks,  under  conditions 
of  perfect  security  and  availability  to  all,  put  at  the  disposal  of 
depositors  the  funds  accumulated  by  themselves,  and  since 
this  security  is  based  upon  the  principle  of  thrift  and  honesty, 
the  material  pledge  is  of  secondary  importance.  In  every  case 
the  good  character  of  the  borrower  is  the  first  security  re- 
quired. Thus  the  ideal  solution  of  the  financial  straits  of 
the  laboring  classes  was  found,  for  they  can  readily  offer 
personal  guarantees  of  the  highest  value,  while  they  cannot 
always  give  material  guarantees. 

The  first  popular  bank  of  the  new  type  was  organized 
in  1848,  but  the  novelty  of  that  institution,  together  with  the 
absence  of  a  law  specially  enacted  for  the  working  out  of  such 
a  new  mechanism,  retarded  its  expansion.  These  obstacles 
once  overcome,  the  banks  soon  acquired  an  extraordinary 
popularity.  During  the  last  25  years  they  have  spread  not 
only  in  Germany  but  all  over  Continental  Europe.  Their 
marvelous  expansion  is  the  best  evidence  that  they  satisfy 
urgent  needs.  The  solution  of  the  economic  problem  of  the 
popular  classes  was  thus  at  last  secured  in  an  institution 
designed  both  to  inculcate  a  spirit  of  thrift  and  to  give  credit. 

THE  CANADIAN  PEOPLE'S  BANKS 

It  is  the  very  essence  of  this  system  which  has  been  in- 
troduced in  Canada — more  particularly  in  the  Province  of 
Quebec — under  the  name  of  "People's  Banks"  (Caisses 
Populaires). 

•Franz  Hermann  Schulze-Delitzsch,  b.  1808  at  Delitzsch,  d.  Apr.  29,  1883,  at 
Potsdam.  Friedrich  Wilhelm  Raiffeisen,  b.  Mar.  30,  1818,  at  Hamm,  Westphalia,  d. 
Mar.    11,    1888,   at   Herresdorff.— Ency,    Brit. 


Our  social  environment  required  us  to  make  certain 
changes  in  the  European  system.  In  particular,  a  somewhat 
different  basis  was  adopted  in  connection  with  the  formation 
of  the  resources  to  be  created,  a  basis  designed  to  stimulate 
highly  the  spirit  of  thrift. 

At  the  outset  the  limitation  of  the  activities  of  a  people's 
bank  and  the  restricting  of  its  membership  to  a  small  area  was 
determined  upon.  This  small  territorial  unit  was  chosen 
because  by  its  very  nature,  except  in  large  cities  that  are  ports 
for  immigrants,  it  is  not  liable  to  frequent  and  rapid  changes 
of  population,  and  also  because — and  this  is  an  essential  con- 
dition of  success — it  offers  opportunity  for  members  to  be- 
come known  to  one  another.  They  can  therefore  form  sound 
judgments  of  the  moral  and  economic  stability  of  their  fel- 
lows. This  limited  area  may  in  rural  districts  be  either  that 
of  the  village  or  the  township,  or  in  cities  that  of  a  religious 
or  fraternal  organization,  the  municipal  ward  or  the  neighbor- 
hood. Such  a  unit  offers  the  essential  conditions  of  success. 
The  intimate  relation  of  parishioners  or,  under  ordinary  static 
conditions,  of  members  of  the  same  municipal  district,  pro- 
vides the  best  means  of  acquiring  a  good  knowledge  of  the 
character,  honesty,  integrity  and  moral  habits  of  the  mem- 
bers of  the  banks.  This  factor  of  success  has  proved  its 
value  in  other  countries,  and  although  our  communities  differ 
much  from  those  of  Europe,  still  it  applies  to  many  groups  in 
America.  There  is  no  reason  why  these  elements  of  strength 
and  of  success  should  not  be  used  here  for  the  promotion  of 
people's  banks.  But  since  a  certain  portion  of  our  population 
is  unstable,  it  goes  without  saying  that  great  care  and  pru- 
dence should  always  be  exercised  in  establishing  a  cooperative 
bank,  especially  in  the  granting  of  membership  and  credit 
to  newcomers  who  may  not  be  well  known  to  their  neigh- 
bors. That  a  certain  percentage  of  people  move  from  one 
locality  to  another  and  10,  20,  or  even  30  per  cent,  of  the 
population  are  more  or  less  unknown  to  their  neighbors,  is 
however,  no  reason  for  depriving  the  stable  portion  of  the 
population  of  the  benefits  of  such  a  credit  association. 


10 

WHO  MAY  BE  A  MEMBER  OF  THE  BANK 

Having  determined  the  basic  unit  upon  which  such  an 
institution  should  be  built,  let  us  now  see  who  can  and  should 
be  members  of  it.  Everybody — that  is,  men,  women,  and 
children — should  become  members  because  they  form  part  of 
the  social  order  of  the  unit  chosen.  But  there  is  an  essential 
condition  of  admission  that  must  be  complied  with;  namely, 
that  every  one  shall  be  honest,  sober  and  industrious.  The 
admission  to  membership  in  such  a  bank  should  be  a  certifi- 
cate of  good  conduct  and  loyalty.  This  is  certainly  not  a 
condition  calculated  to  exclude  a  great  portion  of  the  popula- 
tion. Thank  God  it  is  only  to  the  few  that  such  a  condition 
can  be  an  obstacle,  and  even  in  such  cases  it  is  very  easy  to 
remove  the  obstacle  by  a  happy  return  to  a  better  life. 

It  will  be  observed  that  no  mention  has  yet  been  made 
of  money  or  funds,  and  that  for  a  very  good  reason.  Money 
is  but  a  secondary  consideration,  and  not,  as  elsewhere,  a 
primary  one,  because  the  people's  bank  is  above  all  an  in- 
stitution aiming  at  the  betterment  of  its  members  rather  than 
at  mere  profits — an  association  of  honest  individuals  rather 
than  one  of  mere  funds  like  a  joint-stock  company.  If  money 
were  the  first  consideration  the  institution  would  be  deprived 
of  its  genuinely  social  character.  Being  above  all  a  sort  of 
manufactory  where  capital  is  turned  out  by  the  spirit  of 
thrift,  not  a  reservoir  of  funds  already  accumulated  and  look- 
ing for  a  good  investment,  this  bank  aims  primarily  to  serve 
all  the  people,  not  those  who  look  only  for  big  returns  on 
their  investments. 

Easy  of  access,  it  is  an  ideal  institution  in  the  restricted 
area  in  which  it  operates.  By  its  family-like  nature,  so  to 
speak,  it  cannot  fail  to  invite  everybody  to  put  in  his  savings, 
accepting  the  pennies  of  the  poor  and  not  refusing  the  dollars 
of  the  well-to-do.  By  its  loans  it  benefits  not  members  alone, 
but  the  whole  community.  Funds  for  loans  are  provided  by 
small  shares  payable  in  weekly  or  monthly  instalments  of  a 
few  cents  each,  and  by  small  deposits.  Through  its  workings 
it  puts  the  savings  of  the  people  at  the  disposal  of  the  peo- 
ple; it  becomes  a  school  of  thrift  which  every  one  can  attend, 
helping  through  the  spirit  of  enterprise  and  through  the  virtue 
of  providence. 


11 

It  is  this  double  character  which  caused  Luzzatti,  the 
illustrious  founder  of  the  Italian  people's  bank,  to  say  that 
these  institutions  are  "Perfected  Savings  Banks."  From  an 
economic  point  of  view  they  are  the  triumphant  success  of  an 
honest  and  industrious  democracy.  After  half  a  century  of 
experiments  and  deplorable  mistakes  the  long-awaited  popular 
institution  has  been  evolved. 

Surely  it  is  not  necessary  to  insist  that  the  heads  of 
families  and  young  men  should  become  members  of  such  a 
bank;  this  is  self-evident.  But  why  should  women,  young 
girls,  and  especially  children  join? 

When  the  Canadian  wife  is  virtuous,  reliable  and  thrifty — 
and  thank  God  the  great  majority  are  so — she  is  generally 
the  Minister  of  Finance  of  the  family,  and  the  same  is  true  of 
many  workingmen's  families  in  the  United  States.  It  is  to 
her  that  the  good  husband  entrusts  his  wages ;  it  is  she  who 
manages  them  with  wisdom  and  prudence.  Such  a  wife  will 
always  succeed  in  accumulating  a  small  amount  for  a  rainy 
day,  to  prevent  suffering  in  time  of  unemployment,  of  sick- 
ness and  other  unforeseen  occurrences.  And  if  she  is  a  mem- 
ber of  the  people's  bank  she  will  feel  deeply  interested  in  its 
success ;  she  will  also  induce  her  husband  to  interest  himself 
in  it.  This  union  of  energy  and  good-will  in  the  family  should 
bring  forth  wonderful  results  of  providence  and  thrift.  The 
time  is  past  when  women,  above  all  American  women,  were 
a  negligible  factor  in  the  economic  world. 

Young  girls  should  also  feel  interested  in  the  welfare  of 
such  a  bank.  Most  of  them  will  probably  later  on  be  wives 
and  so  called  upon  to  take  up  the  functions  and  duties  now 
the  lot  of  their  mothers.  Can  they  be  taught  at  too  early  a 
date?  Must  they  not  be  educated  in  thrift  as  well  as  in  any 
other  line  and  shown  how  necessary  it  is  to  insure  the 
material  well-being  of  those  that  will  be  dear  to  them,  and 
consequently  to  make  possible  for  those  dear  ones  a  quiet  life, 
secure  against  the  privations  and  misery  of  poverty  so  often 
brought  about  by  improvidence? 

The  children,  too,  should  be  members,  because  it  is  of  the 
utmost  importance  for  them  to  combat  in  their  first  years  the 
instincts  of  dissipation  and  gluttony  that  develop  so  rapidly, 
alas,  in  our  nature.     So  shall  we  form  in  these  young  people 


12 

the  commendable  habit  of  making  sacrifices  to  overcome  the 
regrettable  practices  of  today.  Moreover,  such  a  course  will 
insure  to  the  bank  a  prosperous  and  long  career  by  forming 
for  later  years  very  desirable  members.  These  children  of 
today  will  be  the  young  men  and  young  girls  of  tomorrow, 
future  husbands  and  future  wives  of  new  households,  and  if 
in  their  early  years  they  are  well  disciplined,  later  on  they  will 
be  the  very  backbone  of  such  local  social  institutions. 

So  much  for  the  first  element,  membership.  This  is  the 
first  and  most  essential  factor;  without  it  there  cannot  be  a 
real  people's  bank,  but  simply  a  society  of  dollars  like  many 
already  in  existence. 

The  second  factor  is  the  funds.  Two  sources  bring  them 
into  the  bank;  the  shares  subscribed  by  members  and  the 
savings  that  they  temporarily  deposit.  Let  us  examine  suc- 
cessively these  two  sources  of  capital. 


THE  SHARES 

Usually  the  value  of  the  shares  is  $5  each;  payable, 
as  we  have  already  said,  in  small  instalments  of  a  few  cents 
each.  These  shares  represent  savings  made  for  a  distant 
need.  They  form  a  reserve,  a  small  capital  that  everyone 
should  gradually  accumulate  in  order  to  be  always  ready  for 
any  emergency  and  not  be  obliged  to  face  poverty  or  to  ask 
charity  from  his  neighbor.  It  is  the  small  treasury  placed 
far  above  the  daily  temptations  of  foolish  expenditures,  which, 
increased  with  perseverance,  becomes  a  sum  sufficient  often 
to  make  one  the  owner  of  a  property  or  of  a  home. 

Must  these  shares  be  left  forever  in  the  bank?  That  is 
to  say,  can  they  never  be  withdrawn  from  it?  No,  such  shares 
can  always  be  withdrawn  whenever  their  owners  wish,  even 
if  there  have  been  but  a  few  cents  paid  in.  They  are  at  the 
entire  disposal  of  the  members,  subject  only  to  the  require- 
ment in  the  by-laws  of  a  notice  of  30  days — generally  a 
legitimate  safeguard  in  cases  where  a  withdrawal  of  shares 
would  involve  a  large  amount.  But  the  bank  should  always 
keep  on  hand  against  any  emergency  a  sufficient  amount  to 
meet  occasional  and  reasonable  withdrawals. 


13 

This  requirement  of  a  notice  is  to  meet  extraordinary 
cases.  During  their  existence  of  60  years  few  of  the  peo- 
ple's banks  in  Europe  have  ever  felt  obHged  to  exact  any 
notice.  It  goes  without  saying  that  the  bank  has  the  strongest 
possible  reason  to  avoid  exacting  that  notice,  as  it  wishes 
to  gain  the  confidence  of  all  and  to  encourage  subscription 
for  new  shares.  It  must  also  be  remembered  that  the  law 
empowers  ordinary  banks  to  compel  depositors  to  give  a 
three  months'  notice  for  ordinary  withdrawals  on  deposits. 
Of  course,  banks  very  rarely  exercise  such  a  right,  but  never- 
theless the  law  can  be  enforced  at  any  time.  The  30  day 
withdrawal  notice  of  the  shares  of  the  cooperative  banks  is 
a  much  shorter  period,  but  as  the  activities  of  such  banks  are 
confined  to  a  very  limited  area,  this  is  considered  a  perfectly 
safe  one. 

VARIABLE  CAPITAL 

Why  have  we  chosen  the  type  of  variable  capital  (with- 
drawable shares)  instead  of  the  more  stable  one  of  permanent 
shares  so  widely  known?  We  make  the  choice  for  two  rea- 
sons. First,  because  of  the  personnel  of  these  popular  socie- 
ties. Members  are  recruited  almost  exclusively  from  the 
working  classes  who  cannot  permanently  isolate  even  the 
smallest  part  of  their  resources  on  account  of  possible  wants. 
To  have  compelled  members  at  the  very  outset  to  tie  up  even 
a  few  dollars  of  their  savings,  would  have  destroyed  their 
good  will  and  prevented  them  from  joining.  Such  a  require- 
ment would  have  deprived  these  classes  of  the  advantages  it 
was  sought  to  confer  upon  them.  Second,  from  a  common 
sense  point  of  view  non-withdrawable  shares  would  have  been 
a  great  mistake.  Experience  has  demonstrated  that  the  with- 
drawal feature  has  been  the  very  basis  of  the  phenomenal 
success  of  the  savings  banks  and  of  the  savings  departments 
organized  in  our  own  banks  of  discount.  If  a  non-with- 
drawable condition  had  been  even  temporarily  imposed  by 
these  banks,  the  laboring  and  agricultural  classes  which  have 
used  them  to  the  number  of  hundreds  of  thousands,  nay  mil- 
lions, would  never  have  put  their  savings  in  them  in  such 
large,  ever-increasing  amounts.    If  the  soundness  of  this  con- 


14 

tention  should  be  contradicted,  all  doubt  might  be  removed 
by  instituting  the  non-withdrawable  system  and  telling  the 
depositors  that  in  future  they  will  not  be  allowed  to  have 
their  money  when  they  please ;  one  would  then  see  the  effect 
upon  the  minds  of  the  people.  The  members  of  cooperative 
banks  must  always  enjoy  full  liberty  to  withdraw  their 
laboriously  accumulated  savings  whenever  they  like,  whether 
from  necessity  or  pure  caprice.     This  is  essential. 


EFFECT  OF  THE  WITHDRAWABLE  FEATURE  ON 

FUNDS 

Does  the  withdrawable  feature  of  the  shares  prevent  a 
proper  and  profitable  utilization  of  the  funds? 

By  no  means,  and  to  be  convinced  of  this  one  has  only  to 
remember  what  takes  place  in  connection  with  the  daily  sav- 
igs  deposited  with  and  loaned  by  our  chartered  banks.  They 
are  withdrawable,  yet  this  facility  to  which  is  due  the  mar- 
velous increase  of  these  deposits  does  not  prevent  the  banks 
from  loaning  them  out  with  a  fixed  date  of  repayment.  These 
funds,  almost  entirely  so  loaned,  bring  to  the  banks  large 
sums  of  money  yearly,  so  that  they  are  able  to  pay  interest 
upon  deposits  and  earn  very  considerable  profits  besides.  If 
these  methods  serve  the  ordinary  banks  why  should  they  not 
more  readily  serve  a  people's  bank,  the  personal  characters 
of  whose  members  are  known  to  the  directors  and  whose 
activities  are  limited  to  the  small  area  of  a  parish  or  muni- 
cipality or  to  the  ranks  of  a  labor  union.  A  close  study  during 
half  a  century  of  the  movement  of  funds  in  savings  banks 
shows  that  deposits,  far  from  diminishing  because  they  are 
withdrawable,  increase  year  by  year.  Moreover,  since  the 
shares  of  members  are  money  laid  aside  with  a  view  to  meet- 
ing  distant  needs,  they  are  less  likely  than  ordinary  savings 
bank  deposits  to  be  suddenly  or  frequently  withdrawn. 


CONFIDENCE   THE   BASIS   OF   SECURITY 

We  have  spoken  of  the  honesty  and  thrift  of  the  mem- 
bers.    These  qualities  are  the  basis  of  security.     Supervision 


15 

is  direct  and  easy  because  members  are  inhabitants  of  the 
same  locality.  In  a  joint-stock  company  supervision  is  much 
more  difficult;  directors  are  entrusted  with  very  considerable 
powers  and  shareholders  are  often  spread  all  over  the  country, 
not  knowing  each  other  or  having  a  personal  knowledge  of 
what  is  done. 

In  addition  to  the  experience  of  cooperative  banks  on  the 
European  continent,  a  similar  experiment  nearer  home, 
although  carried  on  under  conditions  much  less  reassuring  in 
certain  respects,  furnished  us  further  security  in  adopting  this 
new  feature  in  the  people's  banks.  The  mutual  savings  banks 
of  New  England  have  no  capital  to  guarantee  depositors ;  that 
is  to  say,  no  shareholders  are  made  responsible  for  deposits 
by  putting  up  capital  to  insure  reimbursement.  The  whole 
system  is  based  upon  the  honesty  and  good  faith  of  the  organ- 
izers who,  to  the  number  of  20  at  least,  take  upon  themselves 
to  carry  on  such  a  savings  bank.  These  men  have  the  ex- 
clusive right  to  select  from  their  number  the  officers  and  the 
directors  to  be  entrusted  with  the  management  of  the  funds 
deposited  by  the  public.  Management  expenses  being  paid, 
all  profits  are  handed  to  depositors,  less  a  small  percentage 
which  is  annually  laid  aside  with  the  aim  of  forming  a  guaran- 
tee fund  to  protect  depositors  against  loss.  Such  a  fund  must, 
however,  when  completed  never  exceed  an  amount  equal  to 
ten  per  cent,  of  the  total  average  of  the  deposits,  which  is  the 
maximum  usually  prescribed  by  law. 

Organizers  and  directors  are  in  no  way  personally  or 
financially  responsible  for  the  deposits.  It  goes  without  say- 
ing that  if  found  guilty  of  fraud  or  defalcation  involving  a 
loss,  they  would  be  amenable  to  and  punished  according  to 
law. 

This  is  the  system  under  which  are  operated  the  600  odd 
mutual  savings  banks  of  New  England  and  other  states.  They 
have  been  in  existence  for  more  than  70  years.  Should 
it  be  contended  that  the  system  is  a  weak  one  and  that  it 
would  fail  to  inspire  confidence  in  the  public  generally,  we 
would  call  attention  to  the  results.  The  number  of  those 
savings  banks  in  1911  was  635;  the  number  of  their  depositors 
was  7,690,973,  and  the  deposits  totaled  the  huge  sum  of 
$3,458,883,612.    Can  there  be  better  evidence  of  the  confidence 


16 

of  the  public   in   such   banks  notwithstanding  the   apparent 
weakness  of  the  system? 

After  careful  study  of  the  results  of  withdrawable  and 
non-withdrawable  capital,  such  an  example  appeared  to  us  so 
conclusive  that  we  thought  we  could  safely  follow  it.  As 
to  the  other  leading  principles  underlying  the  people's  banks, 
they  are  similar  to  those  prevailing  in  the  cooperative  banks 
of  Europe.  Later  on  it  will  be  shown  that  the  system  is 
still  more  strengthened  by  the  accumulation  of  a  guarantee 
fund  belonging  exclusively  to  the  society;  which  fund,  ac- 
cording to  law,  can  never,  even  in  case  of  liquidation  of  the 
society,  be  divided  among  the  shareholders. 


DEPOSITS 

To  come  now  to  the  savings  branch,  properly  so-called. 
In  the  first  place  no  one  but  members  may  deposit  in  a  peo- 
ple's bank.  Members  may  deposit  sums  which  they  expect 
sooner  or  later  to  withdraw.  The  purposes  for  which  these 
small  savings  are  often  designed  are  current  expenses,  rent, 
wholesale  provisions  for  the  winter  season,  taxes,  etc.,  to- 
gether with  the  monthly  contributions  to  the  mutual  benevo- 
lent societies  to  which  many  workingmen  and  agriculturists 
belong.  Such  savings  also  provide  for  occasional  contingencies 
such  as  births,  marriages,  etc.  Thus  are  members  saved  from 
appealing  for  credit  to  retailers  and  from  the  usurers'  shops. 

A  man  who  does  not  follow  the  wise  course  of  providing 
in  advance  for  such  expenditures  often  finds  himself  short  of 
ready  money,  foolishly  adopts  a  credit  system  and  buys  more 
than  he  really  needs  or  more  than  his  means  justify.  But 
the  day  comes  when  he  must  pay  and  then  the  amount  due 
seems  very  high,  and  his  uneasiness  is  great.  It  must  also 
be  observed  that  money  is  saved  by  buying  for  cash,  for 
much  more  care  is  exercised  when  what  is  bought  must  be 
paid  for  on  the  spot.  Under  such  circumstances  buying  is 
strictly  limited  to  the  amount  of  money  on  hand. 

Deposits  are  always  withdrawable  and  if  a  withdrawal 
notice  is  prescribed  by  the  by-laws,  it  is  one  of  but  a  few  days 
and  only  for  the  purpose  of  giving  the  bank  time  in  special 


17 

cases.  As  has  already  been  said,  a  sufficient  sum  can  be 
kept  on  hand  to  meet  ordinary  demands,  but  generally  the 
new  deposits  received  are  ample  to  fill  the  gap  left  by  with- 
drawals. 


MANAGEMENT 

The  funds  being  provided,  who  is  to  manage  them? 
Officers  freely  chosen,  by  secret  ballot  if  members  so  desire. 
These  officers  are  selected  at  the  general  meeting  of  all  the 
shareholders.  Each  shareholder  has  but  one  vote,  no  matter 
what  the  number  of  his  shares.  All  are  therefore  on  a  foot- 
ing of  perfect  equality,  contrary  to  the  system  prevailing  in 
stock  companies,  where  stockholders  have  as  many  votes  as 
they  have  shares.  Let  it  never  be  forgotten  that  the 
cooperative  people's  bank  is  an  association  of  persons,  not  of 
dollars,  that  the  dominating  factor  is  not  capital,  but  persons. 
This  is  why  each  member  has  but  one  vote. 

Management  is  entrusted  to  the  officers  but  this  does  not 
imply  that  they  have  absolute  authority  to  do  as  they  please. 
On  the  contrary  the  general  meeting  composed  of  all  the 
shareholders  is  the  real  and  dominating  power,  the  officers 
being  only  its  servants  subject  to  its  constant  and  direct  con- 
trol. Their  powers  are  very  limited  and  if  they  exceed  them 
they  do  it  at  their  own  risk,  that  is  to  say,  they  are  then  per- 
sonally responsible  for  every  violation  of  the  members'  man- 
dates. These  officers  are  divided  into  three  committees;  the 
Board  of  Administration  composed  of  at  least  five  numbers, 
but  generally  of  nine ;  the  Credit  Committee  of  at  least  three 
members,  but  ordinarily  of  four ;  and  the  Board  of  Supervision 
of  three  members. 


BOARD   OF  ADMINISTRATION 

To  the  Board  of  Administration  is  given  the  general 
management  of  the  bank.  It  is  entrusted  with  the  important 
duty  of  deciding  what  applicants  may  be  members  and  of 
excluding  those  who  no  longer  deserve  to  be,  for  here  again 
let  it  be  recalled  that  it  is  not  money,  but  good  character  that 


18 

entitles  one  to  membership.  The  Board  must  make  recom- 
mendations to  the  general  meeting  upon  all  measures  which 
in  its  best  judgment  seem  to  be  necessary  to  insure  the  pros- 
perity of  the  society.  It  acts  also  as  a  board  of  arbitration 
in  cases  of  conflict  and  of  appeals  prescribed  by  the  by-laws. 


THE  CREDIT  COMMITTEE 

The  Credit  Committee  deals  exclusively  with  loans  to 
members.  Its  duties  are  delicate  and  important  and  the  selec- 
tion of  its  members  must  be  made  with  care.  Men  possessing 
experience,  prudence  and  generally  well  acquainted  with  the 
moral  character  of  the  members  should  be  selected,  for  it  is 
the  moral  character  of  the  borrower  that  will  be  the  prime 
guarantee  of  the  faithful  reimbursement  of  the  sums  borrowed. 
No  loan  can  be  made  by  the  manager  without  having  been 
first  unanimously  agreed  upon  by  the  Credit  Committee.  If 
one  member  present  is  opposed  to  a  loan  or  does  not  give 
his  consent  to  it,  the  decision  is  suspended  until  he  has  ob- 
tained all  the  information  necessary  to  justify  him  in  sharing 
the  opinion  of  his  colleagues.  If  such  an  unanimity  cannot 
be  established,  the  loan  is  refused. 

The  cooperative  people's  bank  should  loan  money  only 
for  productive  purposes  as  for  emergency  needs,  never  for  a 
frivolous  or  extravagant  purpose.  Expenditures  of  this  sort 
cannot  benefit  the  borrower.  The  bank  being  organized  not 
for  the  purpose  of  damaging  its  members,  but  of  helping  them 
to  become  more  prosperous,  should  never  agree  to  such  loans. 
It  is  for  this  reason  that  the  borrower  is  always  compelled  to 
tell  the  manager  the  object  for  which  he  seeks  a  loan.  If  he 
deceives  the  society  this  is  sufficient  to  cause  his  immediate 
expulsion  as  a  member. 

The  Credit  Committee  supervises  with  great  care  the  re- 
payment of  loans  and  must  always  stimulate  the  manager  to 
compel  payment  of  any  arrears.  It  should  never  allow  a 
borrower  to  be  in  default  in  his  payments,  even  for  one  day, 
without  satisfactorily  explaining  why  he  has  not  been  strictly 
faithful  to  his  engagements.  This  is  an  important  point,  for 
to   permit   such   bad   habits    to  take   root   among  borrowers 


19 

would  be  a  grave  mistake  and  would  imperil  the  interests  of 
the  bank,  apart  from  being  a  great  wrong  to  the  borrower 
himself.  Indeed  it  would  be  an  invitation  to  him  not  only 
to  be  careless  in  such  matters,  which  is  always  deplorable, 
but  to  spend  extravagantly  the  money  that  should  be  used  to 
discharge  his  obligation,  relying  on  being  able  to  come  to  an 
easy  settlement  with  a  bank  which  has  shown  undue  leniency 
to  those  in  debt  to  it.  The  greatest  care  should  be  taken  to 
avoid  giving  so  unfortunate  an  impression.  Moreover,  the 
payment  of  the  loan  if  deferred  might  fall  due  at  a  date  when 
it  would  be  very  difficult  for  the  borrower  to  pay  it,  on  ac- 
count of  some  unforeseen  circumstance.  Such  negligence  is 
also  liable  to  embarrass  the  business  of  the  bank.  Funds 
not  being  very  abundant  and  the  demand  for  loans  numerous, 
it  follows  that  the  Credit  Committee  will  have  to  rely  upon 
a  rigid  regularity  in  reimbursement — unless  proper  notice  is 
given — to  satisfy  the  loans  asked  for.  Loans  should  be 
granted  to  the  greatest  possible  number  of  members.  This  is 
one  of  the  objects  of  the  society,  and  can  be  accomplished  only 
through  punctuality  based  upon  a  well-regulated  system  of 
maturity  of  notes,  the  instalment  plan  being  always  more  ad- 
vantageous to  society  and  to  borrower  alike.  On  the  other 
hand  the  borrower  always  should  be  able  to  rely  upon  the 
good-will  and  even  the  kindness  of  the  bank  as  represented 
by  the  Credit  Committee  and  the  manager.  If  he  is  unable 
to  pay  his  loan  when  due,  the  bank  should  never  be  harsh  or 
unreasonable  with  him ;  circumstances  may  arise  under  which 
it  is  absolutely  impossible  to  fulfil  one's  obligations,  however 
willing  one  may  be.  It  must  be  borne  in  mind  that  the  bank 
never  loans  money  to  a  non-member  however  good  may  be 
the  security  offered  or  the  reasons  given. 

Reimbursements  should  as  far  as  possible  be  divided  into 
5,  10,  or  20  instalments.  This  facilitates  repayment  and  in- 
sures a  constant  flow  of  funds  to  the  bank,  but  the  borrower 
has  always  the  right  to  repay  his  loan  before  maturity,  unless 
the  contrary  is  clearly  stipulated. 

Members  of  the  Credit  Committee  cannot  borrow  from 
the  bank,  either  directly  or  indirectly;  that  is  to  say,  through 
a  third  party.  This  provision  may  result  in  inconvenience 
to  them,  but  such  a  rule  is  a  great  safeguard.     To  loan  to 


20 

oneself  other  people's  money  is  always  a  serious  matter.  It 
is  so  easy  to  exaggerate  one's  own  solvency.  Hence,  mem- 
bers of  the  Credit  Committee  are  strictly  forbidden  to  borrow 
from  the  bank  while  in  office.  Law  as  well  as  prudence  so 
prescribes. 

BOARD  OF  SUPERVISION 

This  Board,  whose  very  name  shows  the  nature  of  its 
duties,  is  the  most  important  one  in  a  cooperative  people's 
bank.  Its  powers  are  large  with  regard  to  the  supervision  of 
the  business.  It  may  even  temporarily  suspend  the  officers  if 
it  finds  them  guilty  of  some  violation  of  the  by-laws,  but  it 
must  immediately  put  all  the  facts  before  the  general  meeting 
which  it  must  call  with  the  least  possible  delay,  leaving  to 
that  meeting  decision  upon  measures  to  be  adopted.  It  must 
examine  the  accounts,  verify  minutely  the  exact  value  of  each 
loan  and  see  that  the  security  offered  is  sound  and  good. 
It  must  see  that  each  committee  and  each  officer  does  his 
duty  without  favor  or  partiality.  As  a  matter  of  fact,  such 
a  board  is  to  all  intents  and  purposes  the  general  meeting 
sitting  in  permanence,  and  having  its  eyes  upon  each  and 
every  one  of  the  officers.  Great  care  therefore  must  be  ex- 
ercised in  the  selection  of  this  board. 


THE  MANAGER  AND  OTHER  OFFICERS 

The  internal  management  of  the  society  is  entrusted  to  a 
manager,  chosen  by  the  Board  of  Administration.  He  acts 
as  bookkeeper  and  receives  all  the  funds.  To  insure  the  faith- 
ful fulfilment  of  his  duties  he  must  give  surety  to  a  reasonable 
amount.  Every  request  for  a  loan  should  be  sent  to  the 
manager.  A  borrower  must  never  talk  to  a  member  of  the 
Credit  Committee  about  a  loan.  Such  a  custom,  if  permitted 
to  grow  up,  raises  serious  difficulties  and  puts  the  members 
of  the  committee  in  a  delicate  position.  The  manager  is  the 
only  channel  of  communication  between  members  and  the 
officers  and  committees  of  the  society. 

The  manager  is  therefore  a  very  important  official,  and 
care  must  be  taken  to  select  one  who  is  competent,  courteous, 


21 

amiable  and  always  ready  to  be  helpful,  but  rigid  in  the  strict 
observance  of  the  by-laws,  even  to  the  smallest  detail.  He 
must  not  allow  any  departure  from  the  rules,  for  such  de- 
partures become  in  the  end  a  source  of  regrettable  abuse  and 
may  bring  about  the  failure  of  the  best  societies.  If  he  has  to 
point  out  abuses  or  negligence  in  the  observance  of  rules,  he 
must  do  so  without  hesitation,  but  should  temper  his  criticism 
with  courtesy  and  good  will,  quahties  which  do  not  exclude 
firmness.  He  must  also  have  a  general  knowledge  of  the 
character  and  status  of  members,  be  acquainted  with  their 
reputation  and  their  solvency.  It  is  not  as  difficult  as  one 
might  suppose  to  find  men  who  possess  all  these  qualities.  > 
Many  possess  them  without  knowing  it. 

Money  on  hand  should  be  deposited  to  the  credit  of  the 
society  in  one  or  several  chartered  banks,  selected  by  the 
Board  of  Administration.  The  manager  should  only  keep  on 
hand  a  small  sum  to  meet  daily  requirements.  That  the  sum 
should  be  small  is  in  his  own  interest,  since  he  is  personally 
responsible  for  all  such  sums. 

The  services  of  all  the  officers  of  a  cooperative  people's 
bank  save  those  of  the  manager  are  gratuitous;  the  law  and 
social  zeal  require  that  this  be  so.  The  manager  alone  may  be 
compensated  for  his  work,  and  his  salary  should  be  in  pro- 
portion to  his  duties.  If  they  be  light  he  should  receive  but 
little;  if  heavy,  his  remuneration  should  be  higher,  for  the 
bank  doing  a  larger  business  and  therefore  receiving  more 
profits  will  be  able  to  give  to  him  a  larger  sum  without 
inconvenience. 

DUTIES  OF  THE  OFFICERS 

A  word  now  about  the  general  duties  of  the  officers.  The 
president  exercises  a  general  supervision  over  the  business 
of  the  bank  and  sees  that  every  one  performs  the  duties  per- 
taining to  his  office.  The  vice-president  assists  the  president 
in  the  discharge  of  his  duties  and,  in  case  the  latter  is  absent 
or  incapacitated,  takes  his  place. 

The  secretary  edits  the  minutes  of  the  meetings  of  the 
members  and  of  the  committees  and  carries  on  the  cor- 
respondence of  the  society.     The  office  of  manager  may  be 


22 

filled  by  any  one  of  the  three  officers  just  named  or  by  another 
member.     Usually  the  secretary  is  chosen  as  manager. 


DIVIDEND 

At  the  end  of  the  year  after  all  expenses,  losses  (if  any) 
and  interest  upon  deposits  have  been  paid,  the  balance — net 
profits — is  appropriated  first  to  the  accumulation  of  a  special 
fund  belonging  to  the  society  as  a  whole.  This  fund  is  divided 
into  three  distinct  parts  called  respectively  "reserve  fund," 
"provident  fund"  and,  if  it  is  thought  advisable  because  there 
is  still  a  balance  left,  a  "surplus  fund."  For  the  two  first  funds 
a  fixed  percentage  of  net  profits  is  taken  each  year.  The  bal- 
ance left  after  these  fixed  percentages  have  been  taken  is  di- 
vided in  the  shape  of  a  bonus  or  dividend  among  the  share- 
holders, in  proportion  to  the  amount  of  shares  paid  in  full 
and  to  the  time  during  which  such  shares  have  been  paid  in 
full  during  the  last  fiscal  year.  This  appropriation  of  the  gross 
profits  is,  of  course,  made  when  the  year  is  closed  and  all  the 
accounts  have  been  rendered.  Up  to  now  no  cooperative  bank 
in  Canada  has  paid  a  dividend  on  its  shares  of  less  than  four 
per  cent.,  and  many  have  paid  four  and  a  half  and  even  five 
per  cent.  Savings  deposits  are  allowed  the  customary  yearly 
interest  of  three  per  cent. 


THE  RESERVE  FUND 

We  now  come  to  a  very  important  point — the  reserve 
fund.  A  cooperative  people's  bank  is  compelled  by  law  to 
lay  aside  yearly  at  least  ten  per  cent,  of  its  net  profits.  This 
percentage  must  be  allowed  to  accumulate  year  by  year  until 
the  total  amount  reaches  a  sum  equal  to  double  the  maximum 
of  the  liabilities  represented  at  any  time  by  the  shares  and 
deposits  of  members.  But  it  is  wise,  especially  in  the  begin- 
ning, to  lay  aside  more  than  ten  per  cent.,  even  if  possible 
to  double  that  percentage,  so  that  the  reserve  fund  may  in- 
crease rapidly  and  reach  during  the  first  years  an  amount  of 
some  relative  importance.  To  prevent  the  temptation  to  dis- 
tribute the  reserve  fund,  the  law  prescribes  that  in  case  of 


23 

liquidation,  even  voluntary,  the  balance  of  the  assets,  includ- 
ing the  reserve  fund,  shall  not  be  distributable  to  the  share- 
holders but  shall  be  given  to  an  object  of  public  utility  to  be 
designated  by  the  Lieutenant  Governor  in  Council.  This 
proviso  is  a  very  v^ise  one,  for  it  w^ould  be  unfair  that  a  group 
of  individuals  should  have  the  right,  at  a  given  moment,  to 
appropriate  the  results  of  the  providence  of  their  predecessors 
who  had  accumulated  this  surplus  with  the  primary  object  of 
insuring  the  permanency  of  their  society  to  the  benefit  of 
future  generations. 

The  purpose  of  these  funds  is :  first,  to  protect  shares  and 
savings  against  all  possible  loss;  also  to  strengthen  a  system 
which  is  based  upon  a  variable  capital.  These  funds  are 
never  to  be  drawn  upon  except  in  cases  provided  by  the  by- 
laws and,  as  has  been  said,  never  to  be  distributed  under  any 
pretext  whatsoever.  Neither  are  they  to  be  kept  idle,  but  are 
to  be  invested  in  sound  enterprises  or  deposited  in  banks*  and 
so  made  to  produce  a  revenue.  Their  existence,  aside  from  the 
advantages  already  indicated,  will  benefit  depositors  by  in- 
creasing the  total  sum  of  the  net  profits  to  be  distributed 
upon  shares  and  will  benefit  borrowers  by  reducing  the  rate 
of  interest  upon  loans.  Thus,  the  cooperative  character  of 
the  bank  is  kept  well  in  view.f 

Borrowers  as  well  as  lenders  are  an  indispensable  factor 
to  the  progress  and  solidity  of  the  bank.  Were  there  no  bor- 
rowers, there  would  be  no  profits ;  were  there  no  members  to 
put  in  their  savings,  there  would  be  no  funds  to  be  loaned 
out.  Moreover,  the  member  who  puts  in  savings  today  may 
be  a  borrower  tomorrow.  The  two  groups  continually  vary 
so  far  as  individuals  are  concerned,  but  the  simultaneous  ex- 
istence of  both  is  absolutely  necessary.  They  are  of  equal 
importance  to  the  success  of  the  bank  and  are  treated  with 
equal  justice  in  the  division  of  the  net  profits,  giving  to  one 
a  higher  dividend  and  to  the  other  reducing  the  rate  of  interest 
on  loans.  Therefore,  whenever  the  dividend  is  increased,  con- 
ditions for  the  borrowers  must  be  bettered  either  through  a 
reduction  of  the  rate  of  interest  or  otherwise.     Hence  the  ne- 


*Also    loaned    to    public    bodies    and    invested    in    government     debentures. 
fThe    average    rate    of    interest    charged    by    the    Canadian    cooperative    banks    is 
about  6%  per  annum — Ed. 


24 

cessity  of  acting  with  great  prudence  when  increasing  the 
dividend  and  reducing  the  rate  of  interest  on  loans,  in  order 
not  to  imperil  the  future  income  of  the  bank,  and  to  necessitate 
return  to  a  lower  dividend  and  a  higher  rate  of  interest  on 
loans. 

This  is  the  cooperative  principle  upon  which  such  credit 
and  savings  societies  are  worked  out.  True,  the  principle  is 
a  new  one  in  banking  matters,  but  it  is  the  very  expression 
of  equity  and  solidarity.  It  must  not  be  forgotten  also  that 
even  the  borrowers  benefit  by  the  increased  dividend,  because 
they  too  are  owners  of  shares.  The  general  reserve  fund  will 
largely  contribute  to  insure  the  permanent  existence  of  the 
bank  because  future  generations  that  inhabit  the  parish  or 
locality  will  desire,  from  the  same  motives  that  influenced  their 
fathers,  to  maintain  it  in  its  integrity.  Through  it  therefore 
the  parochial  or  municipal  unit  will  come  to  stand  not  only 
for  a  religious  or  political  unit  but  also  for  an  economic  one; 
bettered  materially,  intensified  in  its  sense  of  fellowship  and 
more  fruitful  because  it  will  enjoy  a  better  social  organization. 

Without  giving  to  this  new  factor  of  mutual  financial 
relationship  an  exaggerated  importance,  we  believe  that  it 
contains  the  germ  of  a  happy  evolution  for  agricultural  com- 
munities. Here  lies  one  of  the  encouragements  to  the  "back 
to  the  land"  movement;  a  new  inducement  to  abandon  the 
false  attractions  of  city  life. 

THE  COOPERATIVE  BANK  A  NATIONAL  BENEFIT 

Whatever  may  be  the  immediate  or  far  distant,  the  prob- 
able or  unforeseen  consequences  of  the  full  development  of 
these  organisms,  the  nation  can  through  them  accumulate  for 
the  benefits  of  its  citizens  a  treasury  that  will  never  be  des- 
poiled. It  can  build  a  true  economic  fortress  upon  the 
parochial  or  municipal  unity  which  will  give  our  young 
democracy  the  help  required  to  develop  its  energies,  widen 
its  activities,  render  fruitful  its  initiatives,  and  coordinate  its 
existence. 

Relying  upon  the  possession  of  a  capital  protected  against 
the  cupidity  of  individual  egoism  which  will  automatically 
increase  through  the  very  fact  of  its  existence,  we  will  be  able 


25 

to  increase  our  national  wealth  in  a  much  greater  ratio  than 
heretofore,  as  well  as  the  prestige  that  attaches  to  wealth. 
This  will  help  us  to  protect  all  that  is  dear  to  us  and  to  ex- 
tend the  domain  of  our  legitimate  influence. 

To  make  these  economic  units  more  secure,  to  perpetuate 
their  existence  by  the  accumulation  of  a  capital  never  to  be 
divided  among  the  members,  and  as  a  natural  consequence 
to  extend  our  national  influence — this  in  the  last  analysis 
was  our  aim  and  desire  in  giving  to  these  people's  banks  so 
strong  a  local  organization.  By  the  mobilization  of  the  indi- 
vidual funds  we  hoped  to  secure  the  cooperation  of  every  one 
of  good-will,  however  humble;  and  by  the  creation  of  a  re- 
serve fund  to  insure  the  stability  of  the  bank  itself. 

Such  then  was  our  ideal,  an  ideal  which  should  sustain 
these  banks,  apparently  financially  weak,  and  make  them 
capable  of  great  beneficial  service. 


A  RECAPITULATION  AND  A  SURVEY 

Let  us  now  summarize  in  a  few  words  what  has  already 
been  demonstrated  throughout  the  study.  A  cooperative 
people's  bank  is  not  an  ordinary  financial  concern,  seeking 
to  enrich  its  members  at  the  expense  of  the  general  public. 
Neither  is  it  a  loan  company  seeking  to  make  profit  at  the  ex- 
pense of  unfortunates  who  need  loans,  laboring  men  suffering 
from  unemployment,  agriculturists  suffering  from  drought  or 
floods — a  company  having  no  mercy  for  its  victims  and  not 
hesitating  to  impoverish  them  to  the  extreme  limit.  The  people's 
bank  is  nothing  of  the  kind;  it  is  the  expression  in  the  field 
of  economics  of  a  true  Christian  spirit  and  high  social  ideal. 
It  is  based  upon  the  high  conception,  wholly  just,  equitable 
and  fruitful,  of  "union  for  life"  instead  of  "struggle  for  life." 
It  does  not  look  for  big  profits,  although  the  future  may  have 
in  store  surprises  of  a  very  agreeable  character,  as  has  hap- 
pened in  Europe  where,  thanks  to  the  wise  measures  taken 
at  the  start,  yearly  dividends  reach  today  proportions  that  no 
one  would  have  dreamed  of  when  these  banks  were  organized. 

It  is  open  to  all,  provided  that  each  is  honest,  industrious, 
sober,  and  lives  up  scrupulously  to  his  engagements.    Money 


26 

alone  cannot  entitle  one  to  become  a  member.  Dollars  count 
only  after  honesty;  they  cannot  replace  this  quality.  In  the 
joint-stock  company  honesty  is  never  thought  of  as  necessary 
to  membership  because  such  a  company  is  a  mere  aggregation 
of  funds. 

The  area  within  which  it  operates  is  limited  to  the  bound- 
aries of  a  parish  or  a  rural  municipality,  a  labor  union,  a  ward 
or  a  religious  congregation  in  a  large  city.  Its  business  is 
supervised  by  the  interested  persons  themselves,  and  super- 
vision is  facilitated  by  the  restricted  field  in  which  the  bank 
is  doing  business. 

Is  it  any  wonder  that  banks  of  this  character  should  have 
spread  with  wonderful  rapidity  throughout  the  world  until 
there  are  today  about  65,000  such  banks  in  operation,  all  pros- 
perous, and  their  membership  as  well  as  their  number  in- 
creasing month  by  month? 

While  Europe  is  at  the  head  of  the  movement,  even  Asia 
has  awakened  and  in  Japan  alone  at  least  5,000  such  banks 
have  been  organized  within  the  last  few  years.  America  alone 
seems  to  have  ignored  the  idea,  but  a  vigorous  movement  is 
now  started  and  before  many  years  one  may  hope  to  see  great 
achievement  here. 

The  yearly  turnover  of  these  banks  in  the  old  world  has 
reached  a  stupendous  figure.  Although  incomplete,  the  record 
for  1910  showed  that  the  turnover  amounted  to  $5,900,000,000. 
No  doubt  the  figure  today  has  reached  a  total  of  at  least 
$7,000,000,000. 

What  is  most  striking  is  not  the  financial  power  of  the 
units  taken  separately,  except  that  of  certain  banks  in  Italy, 
• — for  almost  none  has  reached  any  remarkable  sum — but  the 
collective  strength  of  these  units  taken  together  and  their 
rapid  multiplication.  The  great  masses  of  capital  accumulated 
by  the  popular  classes  and  managed  by  themselves,  through 
their  freely  chosen  officers,  are  everywhere  helping  the  spirit 
of  enterprise  and  providing  for  the  daily  needs  of  these  very 
classes. 


27 


LA  CAISSE  POPULAIRE  DE  LEVIS 

It  was  the  deplorable  revelations  brought  about  by  law 
suits  in  Montreal  and  elsewhere,  where  poor  borrowers  had 
been  obliged  to  pay  to  infamous  usurers  rates  of  interest 
amounting  to  several  hundred  per  cent,  for  most  insignificant 
loans,  that  induced  the  writer  to  study  carefully  this  problem 
with  a  view  to  finding  out  the  best  possible  solution.  The 
experience  offered,  above  all  by  Germany,  soon  enlightened 
him. 

After  15  long  years  of  constant  study,  at  last  be- 
lieving that  he  had  acquired  the  necessary  theoretical  knowl- 
edge and  being  induced  to  do  so  by  many  of  the  leaders  of 
the  movement  in  Europe,  he  undertook  the  establishment  of 
this  new  system.  Aided  by  the  devoted  zeal  of  a  certain  num- 
ber of  citizens — the  parish  priest  and  several  members  of  the 
Catholic  clergy  of  the  locality — he  succeeded  in  founding  in 
Levis,  Canada,  the  first  bank  of  this  type  ever  organized  on 
this  continent. 

From  the  exalted  ideal  of  the  theory,  pure  and  simple, 
the  next  step  was  the  practical  working  of  the  system.  It 
was  the  only  way  to  convince  obstinate  as  well  as  timid  op- 
ponents that  the  theory  upon  which  it  was  based  was  a  sound 
one,  however  hazardous  it  might  at  first  appear. 

The  Levis  Cooperative  People's  Bank  was  organized  on 
December  6,  1900,  but  for  one  reason  or  another  it  did  not  begin 
its  business  until  January  23,  1901.  This  delay  had  one  good 
result:  it  showed  that  the  zealous  members  of  the  first  hour 
possessed  as  enduring  a  conviction  as  the  founder  himself. 

The  first  money  received  confirmed  the  modest  hope  of 
the  organizer.  The  first  instalment  paid  was  a  dime  and  the 
total  of  the  first  collection  amounted  to  only  $26.  It  must 
be  admitted  that  so  insignificant  a  result  of  all  the  hard  work 
of  propaganda  was  of  a  nature  to  discourage  rather  than  to 
make  one  hopeful  of  great  future  achievements;  to  feel  con- 
fident of  bringing  about  something  like  a  revolution  by  the 
new  system  seemed  absurd.  Indeed,  there  was  no  lack  of 
prophets  to  foretell  a  complete  fiasco.  The  founder  was 
freely  criticised  and  was  even  the  object  of  assertions  of  the 
most  offensive  character.     But  supported  by  devoted  sympa- 


28 

thizers,  he  continued  his  work  of  propaganda  with  even 
greater  energy,  and  today  the  highest  civil,  social  and  ec- 
clesiastical authorities  publicly  support  this  movement  ;in 
Canada. 

The  progress  of  the  Levis  Bank  was  very  slow  compared 
with  that  of  societies  organized  since.  The  first  collection,  as 
has  been  said,  brought  but  $26.40,  and  the  first  financial 
monthly  statement  showed  total  assets  of  $242.80.  The  fol- 
lowing month  this  total  was  but  $497.20.  The  first  six  months 
gave  a  total  of  $1,715.63.  The  assets  of  the  first  fiscal  year 
were  $4,935.54,  and  only  after  two  full  years  did  they  reach 
$15,513.86  and  the  general  turnover  amount  to  $31,116.42. 

We  give  these  figures  to  prove  how  slow  was  the  de- 
velopment of  this  first  bank  and  to  show  that  it  had  no  wealth 
to  rely  upon  and  does  not  owe  its  present  success  to  outside 
help  from  moneyed  men,  but  that  it  contained  a  powerful 
germ  that  needed  only  to  be  fertilized  by  perseverance  and 
steady  purpose. 

The  Levis  People's  Bank  completed  its  twelfth  full  year 
November  30,  1912.  On  that  date  the  general  assets  amounted 
to  $188,306.33.  The  amount  of  current  loans  was  $179,108, 
and  gross  profits  had  reached  $8,593.16.  It  has  already  paid 
to  its  members  in  the  shape  of  dividends  the  sum  of  $17,759.50, 
the  rate  being  now  5%  on  $5  shares.  The  savings 
deposits  have  received  interest  to  the  amount  of  $4,334.49. 
The  total  amount  loaned  out  to  members  was,  on  the  same 
date,  $971,761.94.  Not  one  cent  has  yet  been  lost,  although 
the  total  number  of  loans  on  November  30,  1912  was  5,670, 
three-fourths  of  these  having  been  small  loans  not  exceeding 
$200.* 

Such  is  the  astonishing  progress  that  has  been  accom- 
plished during  12  years  of  persevering  labor  among  a  labor- 
ing population,  often  unemployed,  and  during  a  period 
when  the  high  cost  of  living  has  imposed  a  heavy  burden 
upon  the  very  modest  budget  of  a  working  man's  family! 
Nevertheless,  12  years  are  almost  nothing  in  a  career  which 
should  last  forever. 


*0n  June  30,  1914  the  total  assets  were  $304,985.  On  that  date  the  Levis  bank 
had  made  7,208  loans  amounting  to  $1,396,916.  The  same  proportion  of  small  loans 
had   been    preserved. 


29 

In  order  to  show  more  clearly  the  popular  character  of 
these  banks,  let  us  consider  the  amount  of  the  great  majority 
of  the  loans  on  the  Levis  bank.     Here  are  the  principal  figures: 


less  than  $10. 

660 

$10.  up  to  25. 

1004 

25.  "  "   50. 

1070 

50.  "  "  75. 

541 

75.  "  ''    100. 

651 

3926 

Out  of  a  grand  total  of  5670  there  have  been  3926  loans 
made  for  sums  varying  between  $1  and  $100.  These  fig- 
ures show  that  this  institution  is  truly  the  bank  of  the  people. 
And  what  lessons  in  thrift  it  has  taught !  He  who  appreciates 
the  value  of  a  penny  is  faithful  to  his  obligations  and  never 
fails  to  pay  what  he  owes.  The  spendthrifts,  those  who  pro* 
fess  that  the  penny  is  not  worth  laying  aside,  are  the  very 
persons  who  never  pay  their  debts  and  who  are  always 
hard-up.  But  they  never  fail  to  attend  all  the  pleasure  trips, 
theatricals  or  other  amusements  where  the  dollars  must  be 
spent.  And  the  same  individuals  will  complain  in  the  loudest 
terms  if  they  are  refused  credit  or  a  loan.  Unwilling  to 
make  the  least  sacrifice,  they  look  for  others  to  make  the 
sacrifice  in  order  to  compensate  their  improvidence  and  cap- 
rice, if  not  their  vice  and  debauchery. 

What  a  comforting  sight  it  is  to  see  an  honest  working- 
man,  or  a  settler  coming  to  honor  his  signature!  During  the 
last  12  years,  we  have  had  numerous  opportunities  to 
enjoy  that  spectacle,  and  it  has  been  the  complete  fulfilment 
of  our  dream  of  basing  credit  on  the  merit  of  the  man  himself. 
Up  to  now  there  has  been  no  organization  capable  of  ap- 
preciating the  very  qualities  which  justify  confidence.  Thank 
God,  such  is  no  longer  the  case.  These  men  have  been  proud 
to  show  that  they  understood  their  responsibility  as  well  as 
do  the  manufacturer  and  the  merchant  who  are  the  clients 
of  the  big  banks. 


30 
THE  OTHER  BANKS— FACTS  AND  FIGURES 

We  have  dwelt  more  upon  the  results  of  the  Levis  Bank 
than  we  shall  upon  those  of  others,  because  the  Levis  experi- 
ment is  the  oldest  and  was  founded  in  order  to  convince  us 
that  such  a  bank  could  be  worked  out  successfully  in  Canada. 
With  the  utmost  care  we  watched  this  pioneer  bank  in  its 
different  stages,  strengthening  or  rejecting  points  that  might 
be  inferior  or  faulty.  It  required  eight  years  of  excellent 
results  to  dispel  in  our  mind  every  vestige  of  hesitation,  ti- 
midity or  uneasiness  for  the  future.  It  may  be  that  we  in- 
dulged in  too  many  precautions,  that  we  overdid  the  experi- 
ment, but  this  should  not  be  a  subject  of  blame  but  rather 
of  commendation,  since  those  precautions  show  that  we  did 
not  allow  ourselves  to  be  carried  away  by  the  attractions  of 
a  new  system,  but  that  we  acted  with  even  an  exaggerated 
prudence  and  wisdom.  This  explains  also  why  the  expansion 
of  cooperative  banks  outside  of  Levis  was  begun  only  four 
years  ago.  We  wished  to  complete  the  experiment  before 
spreading  any  knowledge  of  it.  So  during  eight  long  years 
and  more  we  steadily  refused  every  invitation  to  organize 
them  elsewhere,  with  the  exception  of  two  cases,  where,  on 
account  of  the  proximity  of  the  localities,  we  could  supervise 
personally  the  working  of  the  banks.* 

There  are  now  over  150  cooperative  banks  in  Canada — 
not  one  of  which  has  yet  lost  a  penny.  Obviously,  to  give 
the  history  of  each  would  take  too  long.  We  will  therefore 
speak  only  of  those  that  typify  distinct  groups  because  of  the 
peculiar  character  of  the  locality  and  the  special  calling  of 
the  majority  of  the  population.  These  are  (1)  banks  in  ur- 
ban centers  with  a  laboring  population ;  (2)  banks  in  rural 
agricultural  centers;  (3)  those  in  mining  districts;  and  (4) 
banks  among  settlers. 

1.     Urban  and  Laboring  Districts. 

Levis  as  an  urban  district  has  already  been  quoted.  Let 
us  now  take  Quebec  and  Montreal.     The  cooperative  bank 

•There  is  no  Dominion  law  in  Canada  for  cooperative  banks,  Quebec  has 
enacted  a  provincial  statute  recommended  by  M.  Desjardins  but  outside  of  this 
province   cooperative   banks   must   be   formed   as   voluntary   associations. — Ed. 


31 

of  St.  Sauveur,  a  suburb  of  Quebec,  was  founded  in  January, 
1909.  On  November  30,  1912,  it  had  $24,802.21  in  assets  and 
a  general  turnover  of  $57,334    for  less  than  three  years. 

The  Quebec-East  People's  Bank,  in  another  suburb  of 
Quebec,  w^as  organized  in  August,  1910,  and  on  January  31, 
1913,  after  30  months  of  existence,  it  had  assets  of 
$12,893.19  and  a  general  turnover  of  $32,163.32,  with  loans  to 
the  amount  of  $21,780.69.  It  had  350  members,  136  depos- 
itors and  91  borrowers.  The  penny  savings  system  organized 
for  the  benefit  of  the  school  children  had  in  a  few  months 
collected  $207.79. 

The  oldest  people's  bank  in  Montreal  was  established 
in  the  parish  of  the  Immaculate  Conception,  January  31,  1909. 
At  the  end  of  January,  1913,  its  assets  amounted  to  $20,867.45 
and  its  general  turnover  to  $111,272.00. 

In  the  parish  of  St.  Joseph  a  bank  was  started  April  7, 
1912,  and  23  days  later  its  assets  amounted  to  $1,807;  on 
December  31,  1912,  they  had  increased  to  $3,552.01,  and  the 
general  turnover  was  $6,415.41. 

In  the  parish  of  St.  Stanislas  a  bank  was  organized  on 
May  12,  1912,  and  its  progress  has  been  even  more  consider- 
able, taking  into  consideration  the  time  and  circumstances. 
On  Dec.  31,  1912,  seven  and  a  half  months  after  its  organiza- 
tion, total  assets  had  reached  $5,227.74,  with  a  general  turn- 
over of  $12,110.71. 

Three  Rivers  is  a  small  manufacturing  city  of  about 
18,000.  Its  cooperative  bank  was  organized  October  17,  1909, 
and  on  January  31,  1913,  its  assets  amounted  to  over  $43,280; 
its  general  turnover  to  $104,959.70;  its  loans  to  $49,794.40; 
deposits  received,  $64,266.34;  deposits  withdrawn,  $43,101.68. 
It  had  paid  for  interest  on  deposits  $306.69;  for  dividends  on 
shares,  $615.86;  for  all  expenses,  only  $135.81.  The  last  item  is 
indeed  very  small  compared  with  the  general  business  done  of 
$104,959.70.     Its  guarantee  fund  is  already  close  to  $600. 

There  are  also  localities  outside  the  large  cities  or  towns 
where  workingmen  are  in  the  majority.  These  are  to  be 
found  in  rural  districts  where  a  considerable  number  of 
families  are  living  out  of  their  labor  in  the  woods ;  for  ex- 
ample, or  in  some  small  local  industry.  These  small  centers 
present  a  variety  by  themselves  and  have  to  a  certain  extent 


32 

the  character  of  an  urban  district.  In  such  localities  people's 
banks  are  prosperous  and  render  great  service  to  the  laboring 
men. 

Matane,  in  the  country  of  Rimouski,  has  a  people's  bank 
opened  on  August  20,  1911;  in  18  months  the  total  turnover 
reached  $11,302.80.  The  assets  on  the  28th  of  February, 
1913,  were  $4,760.26. 

St.  Joseph  of  Levis,  including  the  small  town  of  Lauzon, 
has  a  population  composed  mostly  of  workingmen.  Its  co- 
operative bank  was  organized  in  1901.  On  January  31,  1913, 
assets  amounted  to  $9,140.96;  the  general  turnover,  to 
$64,630.31;  loans  to  members  to  $33,293.13.  $778  had  been 
distributed  in  interest  and  dividends.  The  guarantee  fund 
stood  at  $705.16. 

The  Windsor  Mills  People's  Bank  during  eight  months — 
from  October  1,  1911,  to  May  21,  1912 — had  done  business 
amounting  to  $2,340,  of  which  $1,457  was  for  small  loans. 

The  People's  Bank  of  Ste.  Anne,  in  the  city  of  Ottawa, 
was  organized  on  April  1,  1912,  and  on  January  1,  1913,  the 
assets  were  $5,415.51,  and  the  general  turnover  for  the  nine 
months  had  reached  $10,355.97. 

Let  us  see  how  such  a  bank  works  among  a  population 
employed  almost  entirely  in  a  great  cotton  mill,  the  "Mont- 
morency Falls  Cotton  Mill."  The  parishes  of  St.  Gregoire 
and  St.  Louis  de  Courville  are  largely  populated  by  work- 
ingmen who  find  their  living  in  that  industry.  Each  of  them 
has  its  parish  bank.  That  of  St.  Gregoire  has  assets  amount- 
ing to  $7,000,  and  the  current  loans  exceed  $5,000.  The  gen- 
eral turnover  has  reached  $35,000.  St.  Louis  de  Courville  has 
had  its  parish  bank  only  since  April  29,  1912;  the  assets  exceed 
$11,000;  the  general  turnover,  $13,191;  loans,  $6,680. 


2.     Agricultural  Districts 

Let  us  now  see  what  has  been  done  in  purely  farming 
districts  among  that  class  of  people  which  up  to  now  has 
been  without  economic  organization,  the  victim  of  the  cu- 
pidity of  the  middlemen  and  the  trusts.  This  deplorable  state 
of  afifairs  has  been  one  of  the  most  active  agencies  in  the 
movement  from  the  farms  to  the  cities.     If  it  continues  we 


33 

may  perhaps  in  Canada  see  a  situation  like  that  deplored  by- 
Rene  Bazin,  who,  writing  of  his  native  land,  exclaimed :  "The 
farms  are  deserted  and  dying!" 

It  is  of  the  highest  importance  that  the  farmers  should 
be  organized  as  are  other  classes  of  the  community,  and  the 
first  step  toward  this  end  is  an  institution  that  will  afford 
these  tillers  of  the  soil  the  capital  they  need  to  improve  their 
industry.  They  should  not  be  frightened  at  an  innovation 
by  those  so-called  wise  men  who  exaggerate  prudence  and 
who,  as  a  matter  of  fact,  are  the  victims  of  their  own  intel- 
lectual deformity  or  of  a  deplorable  professional  prejudice 
which  causes  them  to  look  at  any  new  step  with  fear  or  bias. 
Obviously,  wisdom  is  necessary,  but  audacity  coupled  with 
thoughtfulness  and  prudence  is  also  the  key  to  progress. 
These  men  always  want  to  see  "how  the  enterprise  will  turn 
out"  before  taking  part  in  any  movement  even  if  it  has  sus- 
tained the  test  of  experience.  We  have  met  a  good  many 
of  these  unfortunate  human  beings  who  are  always  behind  the 
rest  of  the  population  but  who  believe  themselves  to  be 
leaders. 

As  a  whole  our  countrymen  are  in  sympathy  with  prog- 
ress based  upon  wisdom  and  do  not,  thank  God,  fear  to  take 
upon  themselves  the  responsibility  that  it  involves.  That  our 
rural  population  is  endowed  with  intelligence  is  apparent  by 
the  number  of  cooperative  banks  which  are  now  working 
with  great  success  among  industrious  and  honest  farmers. 

St.  Ulric  in  the  County  of  Rimouski,  situated  along  the 
shores  of  the  St.  Lawrence,  is  a  parish  having  a  population 
of  about  1,600,  all  farmers.  A  cooperative  bank  was  organized 
on  September  26,  1909,  and  in  37  months  it  had  accumulated 
assets  of  $24,460.38  and  its  general  business  had  reached  the 
rather  startling  figure  of  $116,817.86,  of  which  there  have  been 
loans  amounting  to  $73,530.05.  Not  a  cent  has  been  lost  on 
those  loans.  The  dividends  paid  amounted  to  $632,  and  in- 
terest on  deposits  to  $562.  The  reserve  or  guarantee  fund 
stands  at  $664,  representing  almost  10%  of  the  share  capital 
paid  in. 

Armagh,  in  the  County  of  Bellechasse,  has  a  population 
of  about  1,400,  all  farmers.  The  bank  there  was  organized 
on  February  13,  1910,  and  on  December  31,  1912,  after  a  lapse 


34 

of  34  months,  the  assets  amounted  to  $27,138.23  and  the  turn- 
over, the  enormous  figure  of  $356,686.03 ;  the  loans,  $37,643.58. 
The  dividends  paid  on  shares  amount  to  $400.68 ;  the  interest 
on  deposits  to  $533.79,  while  the  guarantee  fund  stands  at 
$701.82,  or  more  than  12%  of  the  amount  paid  in  upon 
shares.  To  give  an  idea  how  small  is  the  cost  of  management, 
it  will  be  sufficient  to  state  that  the  whole  expenses  incurred 
were  but  $173.49  for  Armagh  and  for  St.  Ulric,  $168.27.* 

The  parish  bank  of  St.  Maurice  of  Champlain,  an  ex- 
clusively rural  parish,  was  founded  August  1,  1909.  Its  assets 
on  November  30,  1912,  were  over  $54,000  and  its  general 
turnover  for  the  period  of  39  months  had  reached  the  enor- 
mous sum  of  $424,000  in  round  figures,  although  the  popula- 
tion of  the  whole  parish  does  not  exceed  1,000. 

Maria,  in  the  county  of  Bonaventure,  is  a  small  parish 
situated  on  the  shores  of  the  Bay  des  Chaleurs,  near  the  Gulf 
of  St.  Lawrence.  Its  population  is  about  800.  The  majority 
are  farmers,  but  a  good  number  of  families  are  still  living  on 
what  was  the  only  industry  in  that  place  in  years  gone  by — 
fishery.  The  cooperative  bank  was  organized  there  on 
September  13,  1908,  and  on  November  30,  1912,  the  assets 
were  $20,485.06,  and  the  general  business  done  in  those  four 
years  had  reached  the  amount  of  $49,294.36,  of  which 
$29,625.91  had  been  for  loans.  Interest  paid  on  deposits 
amounted  to  $468.51;  dividends  on  shares  to  $334,48;  and  the 
total  expense  for  the  four  years  to  $530.67.  It  must  be  stated 
here  that  the  population  is  poor  and  it  is  a  wonder  to  every 
one  who  knows  the  locality  that  such  splendid  results  could 
have  been  achieved  in  so  short  a  period. 

Let  us  now  take  up  still  smaller  parishes,  where,  for- 
tunately, energetic  and  enterprising  citizens  are  to  be  found, 
and  we  will  see  still  better  results  considering  the  number  of 
people. 

St.  Jean  des  Piles  with  a  population  of  800,  part  of  whom 
are  laboring  men  and  the  rest  very  small  farmers,  is  situated 
in  a  rather  poor  agricultural  country  at  the  foot  of  the 
Laurentian  Mountains  in  the  district  of  Three  Rivers,  half 

•By  way  of  illustrating  the  continuous  and  rapid  growth  of  these  banks,  especially 
in  farming  communities,  the  report  of  the  Armagh  bank  on  May  31,  1914,  is  given- 
Assets,  $79,749;  general  turnover,  $568,653;  loans,  $123,060;  dividends  paid,  $1,209- 
interest  paid  on  deposits.  $1,930;  gtiarantee  fund,  $1,673.  While  all  of  these  items 
showed  a  large  increase,   expenses  increased  to  only  $225,   an  increase  of  barely  $52. 


35 

way  between  Montreal  and  Quebec.  Its  cooperative  bank 
was  organized  on  August  22,  1910,  and  on  September  30,  1912, 
in  25  months,  it  had  accumulated  assets  of  $11,972.60,  and  its 
general  turnover  amounted  to  $60,378.49;  loans,  $36,236.77; 
interest  paid  on  deposits,  $308.86;  dividends  on  shares, 
$172.42;  guarantee  fund,  $354.77;  savings  deposits,  $30,551.56; 
withdrawals,  $21,683.64.     The  total  expenses  were  $224.30. 

The  total  number  of  loans  was  at  that  date,  459,  divided 
into  very  small  sums:  i.  e.,  loans  of  $10  and  less,  44;  from 
$10  to  $20,  76;  from  $20  to  $30,  86;  from  $30  to  $40,  4S; 
from  $40  to  $50,  40;  from  $50  to  $60,  20;  from  $60  to  $75,  24; 
from  $75  to  $100,  30;  from  $100  to  $150,  37;  from  $150  to  $200, 
20;  from  $200  to  $300,  19;  from  $300  to  $500,  12;  and  from 
$500  upward,  2.  There  has  even  been  a  loan  of  $1,000,  making 
a  grand  total  of  $36,236.77. 

St.  Joseph,  situated  to  the  extreme  west  of  the  Province 
of  Quebec;  in  fact,  the  last  parish  on  the  west,  is  mainly- 
inhabited  by  poor  settlers.  The  total  population  is  about 
1,400,  out  of  which  there  are  500  to  600  Indians.  The  parish 
bank  was  organized  on  October  22,  1911,  and  on  January 
31,  1913,  the  assets  were  $8,225.94;  the  general  turnover, 
$34,829.91 ;  total  loans,  $16,805.77;  savings  deposits,  $23,240.55; 
withdrawals,  $16,964.11;  interest  paid  on  deposits,  $102.96; 
dividends,  $23.80;  general  expenses,  $45.00;  guarantee  fund, 
$51.42. 

St.  Onesime  of  Kamouraska  is  a  very  small  parish  in- 
habited mostly  by  farmers  and  settlers  who  have  to  work  in 
the  shanties  of  the  lumbermen  part  of  the  year  to  supplement 
their  poor  agricultural  earnings.  When  we  were  invited  to 
organize  a  bank  there  the  priest  asked  us  if  his  parish  was  not 
too  small  for  such  a  venture.  We  answered  no,  and  went 
there  to  organize  the  bank  in  May,  1912.  On  December  31, 
1912,  the  assets  were  $2,913.80;  savings  deposits,  $3,322.51; 
the  general  turnover  had  been  $3,938.29,  the  amount  loaned 
out,  $571 ;  withdrawals,  $975.99. 

For  a  number  of  the  above-mentioned  parish  banks  we 
have  given  the  amounts  of  savings  deposits  received  and  with- 
drawn, but  we  could  have  noted  the  same  facts  for  every  one 
of  the  150  now  in  operation,  as  they  all  carry  on  the  savings 
business    with     equal     success.       For     instance,     the     Levis 


36 

Cooperative  People's  Bank  up  to  January  31,  1913,  had  re- 
ceived savings  deposits  amounting  to  $549,699.34  and  had  re- 
imbursed $493,490.57,  leaving  on  that  date  a  balance  of 
$56,208.77. 

3.     Mining  Centers 

Perhaps  the  v^orst  ground  to  be  chosen  on  account  of 
the  shifting  character  of  the  population  is  a  mining  center. 
In  spite  of  this  great  difficulty,  however,  the  cooperative  bank 
has  succeeded  here  better  than  one  could  expect. 

Thetford  Mines  is  known  all  over  Canada  as  the  greatest 
asbestos  mining  center  on  the  continent.  The  population  of 
about  7,000  works  in  the  mines.  The  people's  bank  was 
organized  about  four  years  ago;  its  assets  are  over  $30,000 
and  its  general  turnover  exceeds  $100,000. 

Black  Lake  is  another  small  mining  town,  situated  three 
miles  from  Thetford  Mines.  Its  bank  was  organized  four 
years  ago.  Without  so  considerable  a  showing  as  the  Thetford 
Mines  bank,  it  is  nevertheless  proud  to  point  to  its  general 
turnover  of  $12,000,  and  to  its  numerous  small  loans  granted 
to  miners  amounting  in  all  to  $9,143.82. 


4.     Banks  Among  Settlers 

We  now  come  to  the  last  group  of  people  served  by 
cooperative  banks  and  from  our  standpoint  it  is  the  one  which 
more  than  any  other  deserves  attention.  The  value  of  the 
tree  is  to  be  judged  by  the  excellence  of  its  fruit  and  what  we 
are  going  to  relate  should  induce  one  to  think  of  the  future 
possibilities  that  are  in  store  for  the  colonization  of  the  im- 
mense territory  yet  to  be  settled  in  Canada. 

On  November  2,  1910,  at  the  invitation  of  the  parish 
priest  of  St.  Damase  of  Matane  who  wished  to  organize  a 
cooperative  bank  in  his  parish,  we  had  the  pleasure  of  visiting 
that  locality,  mainly  inhabited  by  poor  but  courageous  settlers. 
The  population  consisted  then  of  about  700  souls.  As  else- 
where in  Canada,  the  settlers  of  St.  Damase  are  industrious, 
honest,  and  full  of  that  energy  which  is  needed  to  conquer 
and  settle  new  land.    But  settlers  are  generally  very  poor,  and 


37 

we  confess  that  we  were  not  very  hopeful  about  the  success  of 
a  cooperative  bank  among  them. 

From  the  start,  however,  members  were  eager  to  join. 
But  our  apprehension  persisted  for  some  time,  for  we  could 
not  believe  that  the  enthusiasm  shown  at  first  would  con- 
tinue. It  did  continue,  however,  and  on  January  31,  1913, 
26  months  after  it  was  founded,  the  bank  had  in  round 
figures  assets  of  $6,900  and  showed  a  total  business  of 
$25,356.78.  True  the  guarantee  fund  laid  aside  was  very 
small,  but  its  very  existence  proved  that  the  members  were 
hopeful  and  had  faith  in  the  future.  The  loans  granted 
amounted  to  $14,140.18;  $4,825.05  had  been  paid  on  shares,  and 
$11,021.81  in  savings  deposits.  Such  were  the  wonderful  re- 
sults of  the  bold  initiative  of  a  devoted  priest  and  of  an  intel- 
ligent population  who  well  understood  how  to  use  the  self- 
help  principle.  Our  fears  were  entirely  dispelled  and  our 
confidence  at  the  elasticity  of  the  scheme  increased  to  enthusiasm. 

St.  Martin,  in  the  County  of  Beauce,  is  another  instance 
of  the  same  character  and  the  results  were  as  good  as  those 
already  mentioned.  The  bank  there  was  organized  on  July 
25,  1910,  and  on  August  31,  1912,  25  months  later,  it 
had  assets  of  $8,864  and  had  done  a  total  business  amounting 
to  $92,417,  while  the  loans  had  reached  a  total  of  $43,092. 

Ste.  Euphemie,  in  the  County  of  Montmagny,  is  a  very 
small  parish  exclusively  rural,  with  a  population*  of  about 
400.  The  land  is  poor  and  hilly,  sparsely  settled  and  opened 
up  to  farming  within  a  relatively  recent  period.  The  idea  of 
organizing  a  cooperative  bank  in  this  locality  seemed  a  most 
hazardous  one.  Nevertheless  the  experiment  was  tried  and 
the  following  figures  tell  their  own  story  in  such  a  vivid  and 
convincing  way  that  one  need  add  nothing  to  their  interest- 
ing tale. 

The  parish  bank  was  organized  November  13,  1910,  and 
on  January  31,  1913;  that  is,  some  26  months  afterwards, 
the  total  assets  were  $5,103.41  of  which  $4,568.73  was  loaned 
out  in  short-time  loans.  The  general  business  done  reached 
$11,000.48,  of  which  $7,502.76  was  for  loans  and  $2,934.03  had 
been  reimbursed.  Not  a  cent  had  yet  been  lost  nor  was  in 
danger  of  being  lost. 

The  guarantee  fund  amounted  to  $94.79;  the  interest 
paid  on  savings  deposits,  $26.56;  dividends,  $94.98,  and  the 


38 

total  expenses  $40.50.  The  bank  had  received  $5,512.80  in 
deposits  and  had  reimbursed  depositors  to  the  sum  of 
$2,728.34,  leaving  still  on  hand  a  balance  of  $2,784.46.  The 
shares  paid  in  totaled  $2,221.10;  refunded,  $77.58  only;  balance 
on  hand,  $2,143.52 — the  vv^hole  showing  a  magnificent  result 
surpassing  our  most  sanguine  expectations. 

We  recently  had  the  pleasure  of  meeting  the  parish 
priest  of  St.  Joseph  of  North  Temiscamingue  and  we  asked 
him  how  the  bank  in  his  parish  was  doing.  He  said  that  it 
was  more  and  more  appreciated  by  the  population  and  added 
that  several  Indians  were  the  best  members  of  the  bank,  some 
of  them  being  so  enthusiastic  that  they  bought  a  share  for 
their  children  on  the  day  of  their  birth. 


PEOPLE'S  BANKS  IN  THE  UNITED  STATES 

Cooperative  banks  exist  also  in  New  Hampshire  and 
Massachusetts,  and  so  far  as  we  have  heard,  all  are  doing  well. 
The  Commonwealth  of  Massachusetts  in  1909  enacted  a  law 
to  authorize  the  formation  of  cooperative  banks,  and  on  a 
recent  visit  to  Boston,  we  were  told  by  the  Assistant  Bank 
Commissioner  that  over  30  such  banks,  called  credit  unions, 
were  in  full  operation.  We  have  the  figures  for  two  of  these 
institutions  and  are  happy  to  quote  them  as  instances  of  the 
success  of  such  banks  in  the  United  States. 

The  St.  Jean  Baptist  Credit  Union  of  Lynn,  organized 
by  the  Reverend  Father  Parent,  whose  zeal  and  devotion  are 
well  known  to  all  his  parishioners,  is  a  very  prosperous  in- 
stitution. On  January  31,  1913  the  assets  were  $16,754  27;  the 
general  turnover,  $27,525.35  ;  loans,  $17,834,  of  which  $14,704.17 
were  still  outstanding.  The  interest  paid  on  deposits  amounted 
to  $82.50;  dividends  to  $424.32  and  total  guarantee  fund  to 
$233.21.  These  results  were  achieved  in  the  short  period  of 
28  months. 

The  Credit  Union  of  the  parish  of  Saint  Ann  of  New 
Bedford  was  organized  by  the  parish  priest,  ever  zealous  for 
the  welfare  of  his  flock,  Rev.  Father  O.  Valois.  After  two 
years  of  operation,  on  December  31,  1912,  the  assets  were 
$10,551.86;  the  general  turnover,  $20,159.31;  loans,  $12,152,  of 


39 

which    $7,930    were    still    outstanding.      There    was    a    total 
guarantee  fund  of  $129.89. 

There  are  also  in  operation  in  the  United  States  a  num- 
ber of  credit  unions  among  Jewish  farmers  in  New  York, 
Massachusetts,  Connecticut  and  New  Jersey. 


SHARES 

We  now  turn  to  the  internal  structure  of  the  system 
and  to  its  workings,  and  call  particular  attention  to  the  with- 
drawable feature  of  the  share  capital.  As  previously  set  forth, 
it  has  been  frequently  objected  that  such  a  facility  offered  to 
members  would  seriously  handicap  the  working  of  the  funds. 
This  apparent  objection,  however,  falls  completely  to  the 
ground  in  the  light  of  a  practical  experience  extending  over 
many  years  under  the  most  varied  circumstances.  For  in- 
stance, the  Levis  Cooperative  Bank  has  reimbursed  $19,950 
of  its  share  capital  during  its  12  years  and  two  months  of 
existence,  and  still  the  amount  of  the  share  capital  is  con- 
stantly increasing,  being  on  January  31,  1913,  $124,931.39. 
This  has  been  the  case  in  all  of  the  150  banks  which  have  been 
in  operation  for  any  length  of  time. 

If  on  the  other  hand,  the  shares  had  not  been  with- 
drawable, the  tendency  would  have  been  to  make  them  as 
small  as  possible,  as  is  done  in  Belgium,  for  instance,  where 
shares  are  as  small  as  one  franc  each.  This  is  done  that  only 
the  most  insignificant  amount  need  be  so  immobilized,  each 
member  being  required  to  subscribe  for  only  one  share,  the 
balance  of  their  savings  being  placed  on  deposit. 

The  European  system  is  based  upon  unlimited  and  joint 
liability,  because  many  of  the  cooperative  banks  there  mainly 
draw  their  funds  from  outside  sources,  while  in  our  new  sys- 
tem appeal  is  made  largely  to  the  spirit  of  thrift  of  the 
members. 

Having  taken  such  a  view,  there  was  no  necessity  of 
appealing  to  the  unlimited  and  joint-liability  principle.  The 
pioneers  of  the  cooperative  credit  movement  in  Europe  did 
the  best  they  could  with  the  elements  they  had  to  deal  with, 
and  in  departing  from  the  main  principle  of  their  system, 
we  acted  not  in  a  spirit  of  criticism  or  self-pride,  but  with 


40 

a  sense  of  practical  economics.  We  admired  what  had  been 
done  in  Europe,  but  we  thought  that  our  admiration  should 
not  prevent  us  from  improving  upon  the  old  system  or 
adopting  a  new  one  better  suited  to  the  conditions,  circum- 
stances, ideas,  and  prejudices  of  our  people  * 


DIVIDENDS 

The  yearly  dividend  on  shares  has  been  invariably  at 
least  four  per  cent.,  even  for  the  first  year  of  operation.  Some 
banks  have  even  paid  five  per  cent.,  but  we  cannot  approve  of 
such  a  course.  It  is  extravagant  and  should  not  be  indulged 
in  during  the  first  years,  because  it  is  of  paramount  importance 
to  increase  the  guarantee  fund  considerably  before  granting 
such  a  dividend.  If  there  is  one  principle  that  should  more 
than  any  other  be  always  strictly  adhered  to,  it  is  that  the 
dividend  should  never  be  lowered.  Therefore  wisdom  compels 
one  to  be  very  careful  about  increasing  the  rate  paid  on  shares. 
A  good  system  that  we  recommend  is  to  increase  the  dividend, 
not  according  to  yearly  profits  but  according  to  the  increase  of 
the  guarantee  fund.  Of  course,  the  larger  the  guarantee  fund, 
the  larger  also  will  be  the  yearly  profits,  for  that  fund  is  not 
supposed  to  be  idle;  on  the  contrary  it  earns  something  and 
thereby  increases  the  total  gross  profits. 


DURATION  OF  LOANS 

Most  of  the  loans  made  by  the  Canadian  cooperative 
banks  are  for  short  terms  extending  to  six  months  at  the 
outset,  some  having  been  renewed  for  an  additional  six 
months  or  more;  but  loans  have  also  been  made  for  several 
years'  duration  upon  mortgages. 


*On  page  847  of  the  Report  of  the  American  Commission,  Mr,  Henry  W.  Wolff 
is  quoted  as   saying:    "In    Canada  there  is  a   cluster   of   admirable   banks   which   have 

been  in  existence  since   1900 1   do  not  recommend  them  because  they  are 

in  a  very  imperfect  and  elementary  state.  The  first  bank  was  formed  in  Quebec 
in  1900  and  is  an  exact  facsimile  of  the  Luzzatti  bank,  and  the  Luzzatti  system  is 
the    one    most    likely    to    fail    in    America." 

Mr.  Wolff  now  states  that  his  views  concerning  the  Canadian  cooperative  banks 
have  been  incorrectly  reported.  In  a  letter  to  M.  Desjardins  of  May  2,  1914,  he 
reaffirms  the  opinion  he  expressed  in  an  article  in  the  Economic  Review  of  London 
of  October,  1913,  that  the  Canadian  system  of  cooperative  banks  is  the  one  system 
likely    to    succeed    in    the    United    States. 


41 

Nothing  prevents  such  banks,  especially  after  some  years 
of  existence,  from  granting  loans  for  5,  10,  15,  20  or  even 
more  years,  repayable  by  annual  instalments  or  amortization, 
including  both  principal  and  interest,  so  that  at  the  end  of 
the  period  prescribed,  the  whole  debt  is  extinguished.  As 
a  matter  of  fact  the  Levis  Cooperative  Bank  has  granted 
such  a  loan  extending  to  25  years,  repayable  by  annual  in- 
stalments including  1/25  of  the  principal  and  the  interest 
due  for  the  balance  of  the  loan,  deduction  being  made  each 
year  for  the  amount  repaid  upon  the  principal. 

Such  long-time  loans  can  be  safely  made  when  the 
guarantee  fund  has  reached  a  sum  of  some  importance  repre- 
senting, say,  three-fifths  of  the  total  amount  of  such  loans,  and 
when  the  share  capital  has  become  steady,  being  almost  free 
of  yearly  withdrawals.  As  the  bank  grows  older  and  these 
withdrawals  become  less  and  less  in  amount — the  holders  of 
shares  preferring  to  borrow  so  as  not  to  lose  current  divi- 
dends— these  shares  are  secured  to  the  bank.  Moreover,  we 
have  observed,  especially  after  four  or  five  years,  a  general 
tendency  on  the  part  of  shareholders  to  buy  the  shares  of 
those  who  wish  to  withdraw  them,  thus  protecting  the  society 
against  any  serious  decrease  in  the  amount  of  its  capital. 
That  has  been  and  is  our  constant  experience  with  the  Levis 
Cooperative  Bank,  and  no  doubt  the  same  result  will  prevail 
later  with  others. 

All  these  factors  make  it  possible  to  grant  long-time  loans. 
The  rural  cooperative  banks  of  Europe  make  loans  for  even 
a  term  of  30  years,  and  during  their  history  of  over  60  years 
none  has  experienced  any  dfficulty  on  this  account. 


NO   LOSS 

A  most  remarkable  fact,  already  stated  but  which 
deserves  special  emphasis,  is  that  we  have  never  yet  heard 
that  any  of  these  cooperative  banks  have  lost  one  cent  upon 
its  loans.  A  Boston  banker,  being  apprised  of  this  fact, 
told  us  that  it  is  a  marvel,  but  he  acknowledged  that  it  is 
due  to  the  network  of  provisions  made  to  insure  their  good 
working  and  to  the  field  of  activity  so  happily  chosen  in  which 
they  are  carrying  on  their  beneficial  work. 


'  ^       '  42 

CONCLUSION 

While  the  foregoing  pages  contain  much  evidence  of  the 
material  advantages  already  derived  by  the  people  from  the 
working  of  these  cooperative  banks,  financial  betterment  is 
not  the  only  benefit.  For  instance,  we  are  often  met  by  the 
objection  that  as  there  is  an  agency  or  branch  of  a  commercial 
bank  in  the  parish,  there  is  no  necessity  to  organize  a 
cooperative  people's  bank.  Such  an  objection  shows  a  com- 
plete failure  to  understand  the  material  benefits  and  moral 
influence  of  our  societies.  However  important  it  may  be  to 
prevent  the  farmer  and  the  working  man  from  falling  into  the 
clutches  of  the  usurers,  it  is  of  even  higher  importance  to 
educate  and  to  enlighten  these  same  farmers  and  workingmen 
so  that  they  may  be  in  a  position  to  protect  themselves ;  to 
teach  them  to  manage  their  own  business  so  that  they  may 
become  thrifty  and  more  valuable  members  of  the  community. 
In  this  high  conception  of  social  duty  lies  the  real  reward  to 
those  who  have  labored  to  help  the  movement  for  the  People's 
Banks.  Success  for  the  young  democracies  of  this  continent 
depends  upon  the  prosperity  and  worth  of  life  to  the  millions 
of  workingmen  who  compose  them.  For  the  benefit  of  these, 
let  us  substitute  for  the  old  phrase,  the  "struggle  for  life," 
the  new  Christian  ideal,  "union  for  life." 


RUSSELL  SAGE  FOUNDATION  PUBLICATIONS 


THE  PITTSBURGH  SURVEY.  Findings  in  six  volumes,  edited  by 
Paul  U.  Kellogg.  8vo.  Fully  illustrated.  Maps,  charts,  and  tables. 
Price  per  set,  postpaid,  $10. 

Women  and  the  Trades.  By  Elizabeth  Beardsley  Butler.  2d  ed. 
440  pages.     Postpaid,   $1.72. 

Work-Accidents  and  the  Law.  By  Crystal  Eastman.  350  pages. 
Postpaid,  $1.72. 

The  Steel  Workers.  By  John  A.  Fitch,  New  York  Dept.  of  Labor. 
350  pages.     Postpaid,  $1.73. 

Homestead:  The  Households  of  a  Mill  Town.  By  Margaret  F.  By- 
ington.    310  pages.     Postpaid,  $1.70. 

The  Pittsburgh  District  :   Civic  Frontage.  534  pages.   Postpaid,  $2.70. 

Wage- Earning  Pittsburgh.    420  pages.     Price,  $2.50  net.     (In  press.) 

WEST    SIDE   STUDIES.     Embodying  the   results   of   an    investigation 

into   social   and   economic   conditions   on   the   Middle   West   Side   of 

New    York,    carried   on    under   the   direction   of    Pauline    Goldmark. 

In  two  volumes.     12mo.     Illus.     Price  per  volume,  postpaid,  $2. 

Boyhood  and  Lawlessness.     Illus. 

The  Neglected  Girl.    By  Ruth  S.  True. 
Published  in  one  volume.     Postpaid,  $2. 

The  Middle  West  Side:  A  Historical  Sketch.  By  Otho  G.  Cart- 
wright.     Illus. 

Mothers  Who  Must  Earn.     By  Katharine  Anthony.     Illus. 
Published  in  one  volume.     Postpaid,  $2. 
CORRECTION  AND  PREVENTION.    Four  volumes  prepared  for  the 
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volume,  $2.50  net. 

Prison  Reform.  By  Chas.  R.  Henderson,  F.  B.  Sanborn,  F.  H.  Wines 
and  others.  And  Criminal  Law  in  the  United  States.  By  Eugene 
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Penal  and  Reformatory  Institutions.  By  Sixteen  Leading  Authori- 
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Preventive  Agencies  and  Methods.  By  Charles  Richmond  Henderson, 
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Preventive  Treatment  of  Neglected  Children.    By  Hastings  H.  Hart, 
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SAN  FRANCISCO  RELIEF  SURVEY.    Compiled  from  studies  made  by 
six  prominent  relief  workers.     Illus.     Map.    8vo.    510  pages.     Post- 
paid, $3.50. 
WORKINGMEN'S   INSURANCE  IN  EUROPE.     By  Lee  K.  Frankel 
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450  pages.     145  tables.    2d  ed.     Postpaid,  $2.70. 
FATIGUE  AND  EFFICIENCY.    By  Josephine  Goldmark.    Introduction 
by  Frederic  S.  Lee,  Ph.D.    8vo.    358  pages.    4th  ed.    Postpaid,  $2.00. 
THE  DELINQUENT  CHILD  AND  THE  HOME:    A  Study  of  Chil- 
dren in  the  Chicago  Juvenile  Court.     By  Sophonisba  P.  Breckinridge 
and  Edith  Abbott.     8vo.     360  pages.     Postpaid,  $2. 
CO-OPERATION  IN  NEW  ENGLAND :    Urban  and  Rural.    By  James 

Ford,  Ph.D.     12mo.     260  pages.     Postpaid,  $1.50. 
SOCIAL  WORK  IN  HOSPITALS.  A  Contribution  to  Progressive  Medi- 
cine.   By  Ida  M.  Cannon,  R.  N.    12mo.    272  pages.     Postpaid,  $1.50. 


WOMEN  IN  THE  BOOKBINDING  TRADE.  By  Mary  Van  Kleeck. 
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ARTIFICIAL  FLOWER  MAKERS.  By  Mary  Van  Kleeck.  Illus.  12mo. 
280  pages.     Postpaid,  $1.50. 

SALESWOMEN  IN  MERCANTILE  STORES.  Baltimore,  1909.  By 
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THE  STANDARD  OF  LIVING  Among  Workingmen's  Families  in 
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131  tables.     Postpaid,  $2.00. 

MEDICAL  INSPECTION  OF  SCHOOLS.  By  Luther  Halsey  Gulick, 
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edition,  completely  revised.     Postpaid,  $1.50. 

LAGGARDS  IN  OUR  SCHOOLS.  A  study  of  Retardation  and  Elimina- 
tion. By  Leonard  P.  Ayres,  Ph.D.  8vo.  252  pages.  4th  ed.  Post- 
paid, $1.50. 

WIDER  USE  OF  THE  SCHOOL  PLANT.  By  Clarence  Arthur  Perry. 
Illus.     12mo.     434  pages.     3d  ed.     Postpaid,  $1.25. 

AMONG  SCHOOL  GARDENS.  By  M.  Louise  Greene,  M.Pd.,  Ph.D. 
Illus.     12mo.     380  pages.     2d  ed.     Postpaid,  $1.25. 

A  MODEL  HOUSING  LAW.  By  Lawrence  Veiller.  8vo.  80  diagrams. 
352  pages.     Postpaid,  $2. 

HOUSING  REFORM.  A  Handbook  for  Use  in  American  Cities.  By 
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$1.25. 

A  MODEL  TENEMENT  HOUSE  LAW.  By  Lawrence  Veiller.  Work- 
ing Edition.    Postpaid,  $1.25. 

ONE  THOUSAND  HOMELESS  MEN.  A  Study  of  Original  Records. 
By  Alice  Willard  Solenberger.  12mo.  398  pages.  50  tables.  Post- 
paid, $1.25. 

THE  ALMSHOUSE.  By  Alexander  Johnson.  Illus.  12mo.  274  pages. 
Postpaid,  $1.25. 

JUVENILE  COURT  LAWS  in  the  United  States.  Summarized.  Edited 
by  Hastings  H.  Hart,  LL.D.    8vo.     160  pages.    Postpaid,  $1.60. 

CIVIC  BIBLIOGRAPHY  FOR  GREATER  NEW  YORK.  Edited  by 
James  Bronson  Reynolds,  for  the  New  York  Research  Council.  8vo. 
312  pages.     Postpaid,  $1.50. 

HANDBOOK  OF  SETTLEMENTS.  Edited  by  Robert  A.  Woods  and 
Albert  J.  Kennedy.  8vo.  342  pages.  Cloth,  postpaid,  $1.50.  Paper, 
postpaid,  $0.75. 

CARRYING  OUT  THE  CITY  PLAN.  By  Flavel  Shurtleflf.  In  collab- 
oration with  Frederick  Law  Olmsted.     360  pages.     (In  press.) 


The  following,  published  by  Survey  Associates,  do  not  bear  the  im- 
print of  the  Russell  Sage  Foundation. 

OUR  SLAVIC  FELLOW  CITIZENS.  By  Emily  Greene  Balch.  8vo. 
550  pages.    48  full-page  illustrations.     Postpaid,  $2.50. 

VISITING  NURSING  IN  THE  UNITED  STATES.  By  Yssabella 
Waters.     8vo.     367  pages.     2d  ed.     Postpaid,  $1.25. 

FIFTY  YEARS  OF  PRISON  SERVICE.  An  Autobiography.  By  Zebu- 
Ion  R.  Brockway.     Illus.     12mo.     450  pages.     Postpaid,  $2. 

THE  SPIRIT  OF  SOCIAL  WORK.  By  Edward  T.  Devine,  Ph.D., 
LL.D.     12mo.    244  pages.    3d  ed.     Postpaid,  $1. 

SOCIAL  FORCES.  By  Edward  T.  Devine,  Ph.D.,  LL.D.  12mo.  226 
pages,  2d  ed.     Pospaid,  $1. 

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